Unit 1: Chapter 2 - Trade in the Modern World

Question 1

What is Foreign Portfolio Investment?

Answer 1

Investment in businesses located outside of Canada through stocks and bonds

It allows Canadians to spread out their investments, which is less risky.

Question 2

Why do Canadians and Canadian businesses invest outside of Canada?

Answer 2

To spread out investments, provide greater choice and opportunity

Investing in just one area is riskier.

Question 3

What are stocks?

Answer 3

Ownership stake in the company, paid back in dividends

Question 4

What are bonds?

Answer 4

Promise to pay back money with interest

Question 5

What is B2B in the context of importing?

Answer 5

Businesses import finished goods for resale or may import equipment, raw materials, and services

Question 6

What is B2C in the context of importing?

Answer 6

Consumers import products directly

Question 7

What is global sourcing?

Answer 7

Buying equipment, capital goods, raw materials, or services from around the world

Question 8

What is an example of a service that can be imported?

Answer 8

Canadian Businesses may import calling center services from other countries

Question 9

What are some of Canada’s top imported goods?

Answer 9

Motor Vehicle and Parts, Industrial Machinery, and Electrical Machinery

Question 10

Who are Canada’s top import partners?

Answer 10

US, China, Mexico

Question 11

What are Canada’s top exported goods?

Answer 11

Oil & Mineral Fuels, Motor Vehicle and Parts, and Industrial Machinery

Question 12

Who are Canada’s top export partners?

Answer 12

US, China, UK

Question 13

What is a licensing agreement?

Answer 13

Grants permission to use a product, service, brand name, or patent in exchange for a fee or royalty

Question 14

What are exclusive distribution rights?

Answer 14

A form of licensing agreement that grants a company the right to be the only distributor of a product in a specific area

Question 15

What is a franchise?

Answer 15

An agreement to use a company’s name, services, products, and marketing for a fee

Question 16

What support does a franchisor provide to the franchisee?

Answer 16

Support in financing, operations, human resources, marketing, advertising, and quality control

Question 17

What is a joint venture?

Answer 17

A new company with shared ownership formed by two businesses

Question 18

What are the benefits of a joint venture?

Answer 18

Access to markets, products, customers, shared expertise, financing, and technology

Question 19

What is a strategic alliance?

Answer 19

Two companies work together but do not create a separate entity

Question 20

What are foreign subsidiaries?

Answer 20

A branch of a company run as an independent entity in another country

Question 21

How do parent companies interact with foreign subsidiaries?

Answer 21

Set financial targets and allow subsidiaries to manage day-to-day operations

Question 22

What are trade barriers?

Answer 22

Measures that governments implement to control the amount of trade across their borders

Trade barriers include tariffs, quotas, embargoes, and sanctions.

Question 23

What is a trade embargo?

Answer 23

A government-imposed ban on trade with a specific country

Embargoes are often declared to pressure foreign governments to change their policies.

Question 24

What is a trade sanction?

Answer 24

Partial trade embargoes that are short term and economic in nature

An example includes sanctions against North Korea.

Question 25

What laws govern specific industries in Canada regarding foreign investment?

Answer 25

Transportation, Broadcasting Act, Telecommunications Act ## Footnote Each industry may have its own regulations related to foreign investment.

Question 26

Why are standards important in international trade?

Answer 26

Different countries have different standards for manufacturing processes ## Footnote The ISO (International Organization for Standardization) sets quality restrictions.

Question 27

What is protectionism?

Answer 27

Aims to restrict imports through tariffs, quotas, and regulations to boost domestic industry ## Footnote Protectionism shields domestic industries from foreign competition.

Question 28

What are trade barriers?

Answer 28

Measures that governments implement to control the amount of trade across their borders ## Footnote Trade barriers include tariffs, quotas, embargoes, and sanctions.

Question 29

What is a tariff?

Answer 29

Taxes or duties on imports and exports ## Footnote Tariffs make locally manufactured goods relatively cheaper.

Question 30

Define trade quota.

Answer 30

A government-imposed limit on the amount of product that can be imported in a certain period of time ## Footnote Quotas restrict the volume of imports to protect domestic industries.

Question 31

What is a trade embargo?

Answer 31

A government-imposed ban on trade with a specific country ## Footnote Embargoes are often declared to pressure foreign governments to change their policies.

Question 32

What is a trade sanction?

Answer 32

Partial trade embargoes that are short term and economic in nature ## Footnote An example includes sanctions against North Korea.

Question 33

What are foreign investment restrictions?

Answer 33

Limits on the type and amount of international investment allowed ## Footnote Governed by the Investments Canada Act, focusing on benefits for Canadians.

Question 34

What is the exchange rate?

Answer 34

The amount of one country’s currency in relation to the currency of another country.

Question 35

Why is the Canadian dollar often quoted against the U.S. dollar?

Answer 35

Because the two countries are the largest trading partners in the world.

Question 36

What are the winners of a low Canadian dollar?

Answer 36

1) Exporters 2) Canadian Tourism 3) Major Sports Teams

Question 37

What are the losers of a low Canadian dollar?

Answer 37

1) Importers 2) Canadian Travellers 3) Canadian Retail

Question 38

Define floating rate.

Answer 38

An exchange rate that is not fixed in relation to other currencies; price fluctuates according to supply & demand.

Question 39

Define fixed rate.

Answer 39

Currency value is fixed against another currency rate; helps to stabilize currency.

Question 40

What is currency revaluation?

Answer 40

The increase in value of a currency.

Question 41

What is currency devaluation?

Answer 41

Decrease in value of a currency.

Question 42

What economic condition leads to a higher value of the Canadian dollar?

Answer 42

Stable or rising GDP.

Question 43

How do interest rates affect the Canadian dollar?

Answer 43

Increased interest rates lead to a higher value of the Canadian dollar.

Question 44

What is the impact of political instability on currency demand?

Answer 44

Political tension and instability decrease the demand for currency.

Question 45

What are hard currencies?

Answer 45

Stable currencies that are easily converted to other currencies.

Question 46

What are soft currencies?

Answer 46

Unstable currencies that are difficult to convert into other currencies.

Question 47

How does currency supply and demand affect its value?

Answer 47

Currency Revaluation: Demand > Supply Currency Devaluation: Supply > Demand

Question 48

What is demand in the context of supply and demand?

Answer 48

How much of a product or service is desired by buyers ## Footnote Demand reflects consumer interest and willingness to purchase a product.

Question 49

What is supply in the context of supply and demand?

Answer 49

How much of a product is currently offered in the market ## Footnote Supply indicates the availability of a product for sale.

Question 50

What happens to the value of Canadian currency when demand exceeds supply?

Answer 50

The Canadian currency becomes more valuable ## Footnote This can lead to a currency revaluation.

Question 51

What happens to the value of Canadian currency when supply exceeds demand?

Answer 51

The Canadian currency becomes less valuable ## Footnote This can lead to a currency devaluation.