Final Review CH 7-11 Flashcards

1
Q

governments intervene in int’t trade to…

A

political reasons: weapon to influence other countries
local stakeholders
economic reasons: helping local firms
enhancing competitiveness

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2
Q

retaliation

A

comparable or fair access to other countries’ markets

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3
Q

industrialization argument

A

agrarian economies need protection to industrialize

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4
Q

essential industry argument

A

protect important national industries

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5
Q

infant industry argument

A

protect new industry until it becomes more competitive

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6
Q

promoting investment inflows

A

import restrictions lead foreign firms to invest locally

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7
Q

balance of payment objectives

A
import substitution (don't import, make locally)
export promotion (only make products for export)
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8
Q

nontariff bariers

A
voluntary export restrictions
embargoes
subsidies
customs delays
"higher" standards
"buy local" laws
reciprocal requirements for trade
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9
Q

most favored nation clause

A

a tariff reduction granted to one MFN must be granted to all other MFN countries

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10
Q

GATT to WTO

A

more industries (telecomm, financial)
trade in goods AND services
intellectual property rights
better dispute settlement

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11
Q

FDI

A

at least 10% ownership of productive assets

control of production processes, tech and other competitive assets

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12
Q

flow

A

amount of FDI over a period of time

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13
Q

stock

A

total accumulated value of foreign owned assets at a given point in time

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14
Q

outflow

A

amount of FDI leaving a country

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15
Q

inflow

A

amount of FDI entering a country

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16
Q

host country

A

country receiving the FDI

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17
Q

home country

A

country in which the MNC is headquartered

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18
Q

gross fixed capital formation

A

total investment of capital in assets

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19
Q

when is FDI preferable to trade

A

transportation costs too high for exporting
tariff and non tariff barriers very high
lack of excess domestic capacity
scale economies not significant in competitiveness
country of origin effects important
location specific advantages

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20
Q

when is FDI preferable to licensing

A

risk giving away know how to competitors
licensing implies low control over foreign entity
know how not amenable to licensing

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21
Q

what makes FDI successful

A

firms have unique advantages for competing that still apply abroad
local firms don’t have this advantage
FDI experience helps firms compete domestically
more stable profits and earnings

22
Q

gov’t concerns with MNEs

A

MNCs operate in multiple countries, so decisions made in one can have negative effects on another
sheer size of MNC, greater than GDP of some countries
MNCs take away mkt share from local firms, driving them to bankruptcy

23
Q

radical view

A

MNEs enslave less developed countries
Marxism
Dependencia Theory

24
Q

free market approach

A

FDI as way to disperse production and flow of goods and services in the most efficient manner

25
Q

pragmatic view

A

gov’t should maximize potential benefits and minimize potential costs fo FDI

26
Q

extraterritoriality

A

when gov’t applies own laws to firms’ foreign operations

27
Q

economic integration

A

removal of barriers to economic activity among 2 or more countries

28
Q

free trade area

A

no internal tariffs

29
Q

customs union

A

common external tariffs

30
Q

common market

A

factor mobility allowed

31
Q

economic union

A

common monetary and fiscal policies

32
Q

political union

A

common political institutions

33
Q

trade creation

A

resources shift from the areas of least to most efficient producers

34
Q

trade destruction

A

discrimination against outside producers diverts trade to less efficient producers within the country/group

35
Q

interbank market

A

banks dealing with other banks in large volumes

36
Q

exchange rate

A

number of units of one currency needed to acquire one unit of another currency

37
Q

brokers

A

professionals who assist in the transfer of funds between banks and find the most favorable currency prices

38
Q

central banks

A

national banks that implement gov’t policies regarding currency values

39
Q

hard currency

A

usually fully convertible

strong/stable in value with other currencies

40
Q

soft currency

A

mostly not convertible

comparatively weak/unstable

41
Q

law of one price

A

under completely free trade, prices of equivalent goods should be equal across countries

42
Q

PPP

A

inflation differential reflected in the exchange rate

43
Q

interest rate parity

A

real interest rates become equal through arbitrage

difference in nominal interest rates = expected inflation

44
Q

international fisher effect

A

currency of country with lower nominal interest rate is expected to strengthen in the future

45
Q

spot market

A

exchange rates quoted for transactions that require delivery either immediately or within two days

46
Q

indirect quote

A

number of units of the currency needed to acquire one unit of the domestic currency

47
Q

cross rate

A

an exchange rate computed from two other exchange rates

48
Q

forward rate

A

rate quoted for transactions that call for delivery at some future date

49
Q

gold standard

A

practice of pegging currencies to gold & guaranteeing convertibility

50
Q

managed float system

A

some currencies are allowed to float freely, but others are pegged to another currency or managed by government intervention