Unit 6: Chapter 29 Flashcards
Businesses and the International Economy
What is globalisation?
the process by which countries are connected with each other because of the trade of goods and services
What are imports?
foreign goods and services bought by residents of a country
What are exports?
goods and services produced in one country and purchased by residents of another country
What are the advantages and disadvantages of globalisation?
easier to expand and sell to many markets
more competition, but it can be good for customers as the price decreases
What are import tarrifs?
taxes of prices of imported goods, they are a threat to businesses as it makes international goods more expensive which may reduce sales
What are free trade agreements?
agreements between countries to put no tariffs on exported products.
What are import quotas?
limits the quantities of the products that can be imported, this allows local businesses to benefit as it’s hard for them to compete with multinational companies
What are subsidies?
grants from the government given to local businesses to help them compete better with international firms.
What are multinational companies?
a business that operates in more than one country
What are the common features of a multinational company?
- own multiple subsidiary companies and businesses
- produce goods and services in many countries
- HQ based in origin country
- hire lots of workers internationally
- raise large amounts of capital
- they benefit from economies of scale
What is a host country?
the foreign country a multinational company starts selling in
What are the benefits of being a multinational company?
spread risk aWcross companies, global market, local government support, favorable tax incentives
What are the benefits of having multinational companies to the host country?
provides jobs, boosts output, they pay taxes, develop infrastructure, introduce technologies
What are the drawbacks of multinational companies to the host country?
exploitation of employees, damage to the environment, force local corporations out of business, profit repatriation
What is profit repatriation?
when a multinational company sends all the profits back to the home country, therefore the host country is being used and not being rewarded for
What are exchange rates?
the price of one currency in terms of another currency
What is appreciation?
when a currency’s value rises against another currency
What are the results of appreciation on imported and exported goods?
imported goods become cheaper
exported goods being more expensive
What is depreciation?
when a currency’s value falls against another country
What is the result of depreciation on imported and exported goods?
imported goods become more expensive
exported goods become cheaper
