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International Business > Exam 3 > Flashcards

Exam 3 Flashcards

1
Q

International trade

A

purchase,sale, or exchange of goods and services across national borders

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2
Q

benefits of international trade

A

greater choice of goods and services

important engine for job creation in many countries

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3
Q

mercantilism

A

trade theory that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports

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4
Q

three pillars of mercantilism for successful implementation

A
  1. maintain trade surplus
  2. government intervention
  3. colonialism
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5
Q

absolute advantage

A

ability of a nation to produce a good more efficiently than any other nation

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6
Q

comparative advantage

A

inability of a nation to produce a good more efficiently than other nations but an ability to produce that good more efficiently than it does any other good

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7
Q

Porters’s Diamond Theory

A
  1. Factor Conditions
    - Basic Factors
    - Advanced Factors
  2. Demand Conditions
    - sophisticated buyers
  3. Related and Supporting Industries
    - clusters
  4. firm strategy, structure and rivalry government and chance
    - role of government
    - chance events
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8
Q

regional economic integration (regionalism)

A

process whereby countries in a geographic region cooperate to reduce or eliminate barriers to the international flow of products, people or capital

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9
Q

free trade area

A

removes all barriers to trade among members with each determining its own barriers against nonmembers

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10
Q

customs union

A

adds the requirement that all members set a common trade policy against nonmembers

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11
Q

common market

A

add the free movement of labor and capital and sets a common trade policy against nonmembers

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12
Q

economic union

A

requires members to harmonize their tax, monetary, and fiscal policies, create a common currency, and concede some sovereignty to the larger organization

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13
Q

political union

A

requires members to coordinate their economic and political policies against nonmembers, with a few exceptions

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14
Q

case for regional integration

A
  • trade creation
  • greater consensus
  • political cooperation
  • employment opportunities
  • corporate savings
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15
Q

case against regional intergration

A
  • trade diversion
  • shifts in employment
  • loss of national sovereignty
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16
Q

trade creation

A

is the increase in the level of trade among nations that results from regional economic integration

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17
Q

trade diversion

A

is the diverting of trade away from nations not belonging to a trading bloc and toward member nations.

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18
Q

European Union

A

Management Implications of the Euro:

  • the euro removes financial obstacles created by the use of multiple currencies
  • the euro makes prices among markets more transport
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19
Q

copenhagen criteria

A
  • stable institutions
  • functioning market economy
  • assume membership obligations
  • adopt rules of the community, court of justice and treaties
20
Q

european free trade association

A
  • feared a loss of national sovereignty
  • feared destructive rivlary
  • desired free-trade gains
  • cooperates with eu
21
Q

a country may receive membership in the european union once it meets certain criteria called what?

A

copenhagen criteria

22
Q

North American Free Trade Agreement (NAFTA)

A
  • effective in january 1994

- comprises a makrket with 450 million consumers

23
Q

effects of nafta

A
  • growing trade among the 3 participation nations
  • effect on employment and wages is not as easy to determine
  • claims of environment protection efforts
  • delays in NAFTA expansion
24
Q

3 nations that belong to NAFTA

A

Canada, Mexico and US

25
Devaluation
intentionally lowering the value of a nation's currency | lowers the prices of country's export and increases the prices of imports
26
revaluation
intentionally raising the value of a nation's currency
27
stable exchange rates
improve accuracy of forecasts and financial planning
28
predictable exchange
reduce surprises of unexpected rate changes
29
efficient market view
view that prices of financial instruments reflect all publicly available info at any given time
30
inefficient market view
view that prices of financial instruments do not reflect all publicly available info
31
Forecasting techniques
fundamental analysis | technical analysis
32
fundamental analysis
technique that uses statistical models based on fundamental economic indicators to forecast exchange rates
33
technical analysis
technique that uses charts of pasts trends in currency prices and other factors to forecast exchanges rates
34
forecasting difficulties
- unexpected events - human error - regulatory changes
35
Law of one price
principle that an identical item must have an identical price in all countries when the price is expressed in a common currency
36
Purchasing Power Parity (PPP)
PPP can be interpreted as the exchange rate between two nations currencies that is equal to the ration of their price levels
37
arbitrage opportunity
an opportunity to buy a product at a specific price in one country and sell it at a higher price in another country
38
Multinational corporation
a business that has direct investment abroad in multiple countries is a multinational corporation
39
two factors of born global firm
1. adopts a global perspective | 2. engages in international business from at or near its inception
40
globalization
trend toward greater economic, cultural,political and technological interdependence among national institutions and economies
41
globalization of markets
convergence in buyer preferences in markets around the world
42
globalization of production
dispersal of production activities worldwide to minimize costs or maximize quality
43
benefits of globalization of markets
- can reduce marketing costs (global strategy) - creates new market opportunities - levels uneven income streams - local buyer's needs - global sustainability- meet current needs w/o compromising future generations
44
benefits of globalization of productions
- access lower-cost workers - access technical expertise - access production inputs
45
what global organizations have helped expand globalization
GATT 1947 to WTO International Monetary Fund The world bank regional trade alliances like NAFTA and EU
46
People opposed to globalization say that is does what to national cultures?
homogenizes national cultures

International Business (2 decks)

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