Unit 2,3 TACN3

The purchase, sale or exchange of goods or services across national borders is called___

international trade

A trade theory which holds that a government can improve the economic well-being of the country by encouraging exports and stifling imports to encourage wealth in the form of precious metals is___

mercantilism

___is the condition that results when the value of a nation’s exports is greater than the value of imports.

Trade surplus

A condition that results when the value of a country’s imports is greater than the value of its exports is

Trade deficit

Sending goods to another country for sale or trade is called a/an___

exporting

A trade theory which holds that nations can increase their economic well-being in specialising in goods that they can produce more efficiently than anyone else is called theory of

absolute advantage

Bringing in goods from another country for sale or trade is called

importing

is a trade theory which holds that nations should produce those goods for which they have the greatest relative advantage.

Theory of comparative advantage

A trade theory which holds that nations will produce and exports product that use large amounts of production factors that they have in abundance and will import products requiring a large amounts of production factors that they lack is

 factor endowment theory.

Financial assistance to domestic producers in the form of cash payments, low-interest loans, tax break, product price supports, or some other form is called

subsidy

 When a government guarantees that it will repay the loan of a company if the company should default on repayment, it is called

a loan guarantee

 A designated geographic region in which merchandise is allowed to pass through with lower customs duties and/or fewer customs procedures is called

 a(n) foreign trade zone

is a theory of the stages of production of a product with new ‘know-how’: it is first produced by the parent firm, the by its foreign subsidiaries, and finally anywhere in the world where cost are the lowest; it helps explain why a product that begins as a nation’s export often ends up as an import.

International product life cycle (IPLC) theory

A complete ban on trade (imports and exports) in one or more products with a particular country is called

an embargo

 is a trade theory which holds that a government can improve the economic well-being of the country by encouraging exports and stifling imports. 

Neo-mercantilism

A treaty that was designed to promote free trade by reducing both tariffs and non-tariff barriers to international trade is called

the GATT

is a trade theory that extends the concept of comparative advantage by bringing into consideration the endowment and cost of factors of production and helps to explain why nations with relatively large labour forces will concentrate on producing labour intensive goods, whereas countries with relatively more capital than labour will specialise in capital-intensive goods.

Heckscher-Ohlin theory

A finding by Wassily Leontief, a Nobel Prize-winning economist, which shows that the United States, surprisingly, exports relatively more labour-intensive goods and imports capital-intensive goods is

Leontief paradox

Countries import some goods and services from abroad, and export others to the rest of the world. ____is called visible trade in Britain and merchandise trade in the US.

Trade in commodities

___export a limited range of primary commodities such as foodstuffs, fuels and industrial raw materials, etc

The LCDs

are the ratio of the unit price of exports to the unit price of imports. 

Terms of trade

The purchase of physical assets or a significant amount of ownership of a company in another country to gain a degree of management control is called ___ 

FDI

___ is an investment that does not involve obtaining a degree of control in a company.

Portfolio Investment

The _____ theory states that a company will begin by exporting its product and later undertake foreign investment as a product moves through its life cycle.

International Product Life Cycle

The _____ states that firms undertake foreign direct investment when the features of a particular location combine with ownership and internalization advantage to make a location appealing for investment.

Eclectic Theory

The advantage of locating a particular economic activity in a specific location because of the characteristics of that location is called _____.

Location Advantage

An _____ is the advantage that arises from internalizing a business activity rather than leaving it to a relatively inefficient market.

Internalizing Advantage

The extension of company activities into stages of production that provide a firm's inputs or absorb its output is called _____.

Vertical Integration

The theory states that a firm tries to establish a dominant market presence in an industry by undertaking foreign direct investment.

Market Power Theory

The benefit of _____ is greater profit because the firm is far better able to dictate the cost of its inputs and/or the price of its outputs.

Market Power

The _____ refers to building a subsidiary abroad from the ground up.

Greenfield Investment

A system of production in which each of a product's components is produced in that location in which the cost of producing the components is lowest is called _____.

Rationalized Production

A country's _____ is a national account that records all payments to entities in other countries and all receipts coming into the nation.

Balance of Payment

The _____ is a national account that records transactions involving the import and export of goods and services, income receipts on assets abroad, and income payments on foreign assets inside the country.

Current Account

When a country imports more goods, services, and income than it exports, it is called _____.

Current Account Deficit

A _____ occurs when a country exports more goods, services, and income than it imports.

Current Account Surplus

_____ is a national account that records transactions that involve the purchase or sale of assets.

Capital Account

_____ influence how international companies operate in host nations.

Performance Demands

_____ prohibit non-domestic companies from investing in certain industries or owning certain types of businesses.

Ownership Restrictions

A is a government tax levied on a product as it enters or leaves a country.

tariff

A tariff levied by the government of a country that is exporting a product is called an

export tariff

A tariff levied by the government in a country that is importing a product is called an

import tariff

A tariff levied as a percentage of the stated price of an imported product is called

ad valorem

A tariff levied as a specific fee for each unit (measured by number, weight, etc.) of an imported product is called

specific tariff

 A tariff levied on an imported product and calculated as a percentage of its stated price, and partly as a specific fee for each unit is referred to as a(n)

compound tariff

The     is the only international body dealing with rules of trade between nations.

WTO

When a company exports a product at a price lower than the price normally charged in its domestic market, it is said to be

dumping

___is the balance between exports and imports in an economy.

Balance of trade

____showing trade in goods and services, income and unrequited transfers (e.g foreign aid payments, workers remittances, etc.) over a specific period. 

Current account

is a non-binding intergovernmental instrument that seeks to regulate certain types of behaviour of governments or private corporations. 

Code of conduct

records currency inflows and outflows due to international dealings in financial assets, such as investments and loans. 

Capital account

 is a statistical summary of a country’s total trade, other economic transactions and financial flows at a given time.

 Balance of payment

are designed to protect domestic producers and sellers of goods, whereas competition laws are meant to protect consumers and importers. 

Anti-dumping laws

___states that the success of a firm or an industry is based on cost advantages in the production of a relatively standardized product or product-based advantages related to the development of differentiated products.

The theory of competitive advantage

means approaches of governments to the promotion and protection of competition, competition policy is often seen as promoting especially the interest of the consumer

Competition policy

describes the increasing integration of national economic systems through growth in international trade, investment and capital flows.

Globalization

covers governmental acts, policies and practices which influence trade in goods and services

Commercial policy

is the extension of economic activity across national borders to harness the benefits of lower costs in other economies, with countries specializing in a particular stage of production

Internationalization

prevents the exposure of domestic producers to the rigours of the international market.

Protectionism

the free movement across borders of goods, services, capital and people

Free trade

is a general term for the gradual of complete removal of existing impediments to trade in goods and services.

Trade liberalization

is an agreement between two countries setting out the conditions under which trade between them will be conducted

Bilateral trade agreement

the complete framework of laws, regulations, international agreements and negotiating stances adopted by government to achieve legally binding market access for domestic firms

Trade policy

an approach to the conduct of international trade based on cooperation, equal rights and obligations, non-discrimination and the participation as equals of many countries regardless of their size or share of international trade

Multilateralism

is an intergovernmental agreement aimed at expanding and liberalizing international trade under non-discrimination, predictable and transparent conditions set out in an array of rights and obligations

Multilateral trade agreement

is a group of countries committed to the pursuit of a common external trade policy.

Common market

is a system under which the exchange rate for converting one currency into another is continuously adjusted depending on the law of supply and demand.

Floating exchange rate

is the absence of barriers to the free flow of goods and services between countries

Free trade

International treaty that committed signatories to lowering barriers to the free flow of goods across national borders led to WTO.

GATT

means moving away from an economic system in which national markets are distinct entities

Globalization of markets

is a foreign direct investment in the same industry abroad as a firm operates at home

Horizontal FDI

states that new industries in developing countries must be temporarily protected from international competition to help them reach a position where they can compete on world markets with the firms on developed nations.

Infant industry argument

is a requirement that some specific fraction of a good be produced domestically

Local content requirement

is a quota on trade imposed from the exporting country’s side, instead of the importer’s; usually imposed at the request of the importing country’s government

Voluntary export restraint (VER)

is a country with exceptionally low, or no income taxes

Tax haven

is an economic philosophy advocating that countries should simultaneously encourage exports and discourage imports

Mercantilism

means the level of output at which most plant-level scale economies are exhausted

Minimum efficient scale

is a staffing policy in an MNE in which host-country nationals are recruited to manage subsidiaries in their own country, while parent-country nationals occupy key positions at corporate headquarters

Polycentric staffing

is a situation in which all countries can benefit even if some benefit more than others

Positive - sum game

is a measure of how responsive demand for a product is to changes in price

Price elasticity of demand

is government financial assistance to a domestic producer

Subsidy

means certain sectors of the economy are left to private ownership and free market mechanisms, while other sectors have significant government ownership and government planning

Mixed economy

The market in which currencies are bought and sold and in which currency prices are determined is called the _____.

Foreign Exchange Market

The practice of insuring against potential losses that result from adverse changes in exchange rates is called _____.

Currency Hedging

Currency is the instantaneous purchase and sale of a currency in different markets for _____.

Arbitrage Profit

Currency is the purchase or sale of a currency with the expectation that its value will change and generate a profit. This is called _____.

Speculation

In a quoted exchange rate, the currency with which another currency is to be purchased is called the _____.

Quoted Currency

In a quoted exchange rate, the currency that is to be purchased with another currency is called the _____.

Base Currency

The exchange rate requiring delivery of the traded currency within two business days is called the _____.

Spot Rate

The exchange rate at which two parties agree to exchange currencies on a specified future date is called the _____.

Forward Rate

Forward is a contract requiring the exchange of an agreed-upon amount of a currency on an agreed-upon date at a specific exchange rate.

Forward Contract

A _____ is the simultaneous purchase and sale of foreign exchange for two different dates.

Swap

Currency that trades freely in the foreign exchange market, with its price determined by the forces of supply and demand is called a _____ currency.

Hard/Convertible Currency

Exchange of goods and services between two parties without the use of money is called _____.

Barter/Counter Trade

An international monetary system in which nations linked the value of their paper currencies to specific values of gold was called the _____.

Gold Standard

A system in which the exchange rate for converting one currency into another is fixed by international agreement is called a _____ system.

Fixed Exchange-Rate System

The _____ was an accord among nations to create a new international monetary system based on the value of the U.S. dollar.

Bretton Woods Agreement

The agency created by the Bretton Woods Agreement to provide funding national economic development efforts is called the _____.

World Bank

_____ was the agency created by the Bretton Woods Agreement to regulate fixed exchange rates and enforce the rules of the international monetary system.

IMF

An exchange-rate system in which currencies float against one another with governments intervening to stabilize currencies at a particular target exchange rate is known as a _____ system.

Managed Float System