Global Business – Chapters 5–8 Study Guide

These flashcards cover key vocabulary and concepts from Chapters 5 to 8 of the Global Business study guide for exam review.

Export vs Import

Export = selling abroad; Import = buying from abroad.

Trade Deficit

When a nation imports more than it exports.

Mercantilism

Wealth of world is fixed; nations should export more and import less.

Absolute vs Comparative Advantage

Absolute: more efficient in producing a good; Comparative: lower opportunity cost.

Product Life Cycle Theory

Trade patterns shift as products mature (innovation → maturity → decline).

Tariff Barrier

A tax on imports used to discourage foreign products.

Nontariff Barriers (NTBs)

Quotas, subsidies, local content rules, or administrative policies restricting imports.

FDI vs FPI

FDI = direct control in foreign assets; FPI = passive investment (stocks/bonds).

OLI Framework

Ownership, Location, Internalization advantages explain FDI motivation.

Dissemination Risk

Risk that a firm’s know-how leaks when licensing to foreign firms.

Agglomeration

Clustering of firms for shared knowledge and skilled labor.

Obsolescing Bargain

After FDI, host government may renegotiate terms once profits appear.

Foreign Exchange Rate

The price of one currency in terms of another.

Appreciation vs Depreciation

Appreciation = increase in currency value; Depreciation = decrease.

Floating vs Fixed Exchange Rate

Floating = market-determined; Fixed = government-set.

Bretton Woods System

Fixed exchange rate pegged to the U.S. dollar (1944–1973).

Currency Hedging

Financial transaction protecting against exchange rate fluctuations.

Bandwagon Effect

Investors move in the same direction at the same time.

Global Economic Integration

Reducing trade/investment barriers worldwide.

World Trade Organization (WTO)

Governs global trade; successor to GATT since 1995.

Types of Regional Integration

Free trade area, customs union, common market, economic union, political union.

Brexit

UK’s withdrawal from the European Union.

USMCA

Trade agreement replacing NAFTA among U.S., Canada, and Mexico.

Belt and Road Initiative (BRI)

China’s global infrastructure investment strategy.