Unit 3-2

________ 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 laws 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 the ______.

GATT

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

Globalization of markets

________ is 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 of 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.

Ethnocentric staffing

A situation in which all countries can benefit even if some benefit more than others is called a __________.

Positive sum game

A measure of how responsive demand for a product is to changes in price is called __________.

Price elasticity of demand

Government financial assistance to a domestic producer is referred to as a __________.

Subsidy

Certain sectors of the economy are left to private ownership and free market mechanisms, while other sectors have significant government ownership and government planning; this is known as __________.

Mixed economy