Chapter3

Question 1

buying products from another country.

Answer 1

Importing

Question 2

selling products to another country

Answer 2

Exporting

Question 3

movement of goods and services among nations without political or economic barriers.

Answer 3

Free trade

Question 4

states that a country should sell to other countries those products it produces most effectively and efficiently, and buy from other countries those products it cannot produce as effectively or efficiently

Answer 4

Comparative advantage theory

Question 5

produce a specific product more efficiently than all other countries.

Answer 5

Absolute advantage

Question 6

total value of a nation’s exports compared to its imports measured over a particular period

Answer 6

Balance of trade

Question 7

occurs when the value of a country’s exports exceeds that of its imports.

Answer 7

Trade surplus

Question 8

difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flows coming into or leaving a country from other factors such as tourism, foreign aid, military expenditures, and foreign investment.

Answer 8

Balance of payments

Question 9

selling products in a foreign country at lower prices than those charged in the producing country

Answer 9

Dumping

Question 10

the right to manufacture its product or use its trademark to a foreign company (the licensee) for a fee (a royalty)

Answer 10

Licensing

Question 11

foreign company produces private-label goods to which a domestic company then attaches its own brand name or trademark

Answer 11

Contract manufacturing

Question 12

partnership in which two or more companies (often from different countries) join to undertake a major project.

Answer 12

Joint venture

Question 13

long-term partnership between two or more companies established to help each company build competitive market advantages.

Answer 13

Strategic alliance

Question 14

buying of permanent property and businesses in foreign nations.

Answer 14

Foreign direct investment

Question 15

company owned in a foreign country by another company, called the parent company.

Answer 15

foreign subsidiary

Question 16

one that manufactures and markets products in many different countries and has multinational stock ownership and management.

Answer 16

multinational corporation

Question 17

investment funds controlled by governments holding investment stakes in foreign companies.

Answer 17

sovereign wealth funds

Question 18

is the value of one nation’s currency relative to the currencies of other countries.

Answer 18

Exchange rate

Question 19

lowers the value of a nation’s currency relative to others.

Answer 19

Devaluation

Question 20

Complex form of bartering in which several countries each trade goods or services for other goods or services.

Answer 20

Countertrading

Question 21

use of government regulations to limit the import of goods and services.

Answer 21

Trade protectionism

Question 22

taxes on imports, making imported goods more expensive to buy.

Answer 22

Tariffs

Question 23

limits the number of products in certain categories a nation can import.

Answer 23

Import quota

Question 24

complete ban on the import or export of a certain product, or the stopping of all trade with a particular country.

Answer 24

Embargo

Question 25

global forum for reducing trade restrictions on goods, services, ideas, and cultural programs

Answer 25

General Agreement on Tariffs and Trade (GATT)

Question 26

mediate trade disputes among nations.

Answer 26

World Trade Organization (WTO)

Question 27

(also called a trading bloc) is a regional group of countries with a common external tariff, no internal tariffs, and coordinated laws to facilitate exchange among members.

Answer 27

Common market

Question 28

which created a free-trade area among the United States, Canada, and Mexico.

Answer 28

North American Free Trade Agreement (NAFTA)