Chapter 5 Study Flashcards

International Trade

Purchase, sale, or exchange of goods and services across national borders.

Benefits of International Trade

International trade provides a country's people with a greater choice of goods and services. International trade is also an important engine for job creation in many countries.

Merchandise Exports are how many more times as valuable as service exports?

4x (Merchandise exports: 16 trillion, Service Exports: 4 trillions)

Trade Between a developing nation, and a neighboring developed nation.

Trade dependency

Mercantilism

Trade theory that nations should accumulate financial wealth, usu­ally in the form of gold, by encour­ aging exports and discouraging imports.

How was mercantilism implemented:

Trade Surpluses, Government Intervention, Colonialism

1. Mercantilism: Trade Surpluses

Condition that results when the value of a nation's exports is greater than the value of its imports.

2. Mercantilism: Government Intervention

Governments actively intervened in international trade in order to maintain a trade surplus.The governments of mercantilist nations did this by either banning certain imports or imposing various restrictions on them, such as tariffs or quotas. At the same time, the nations subsidized industries based in the home country in order to expand exports.

Absolute advantage

Ability of a nation to produce a good more efficiently than any other nation.

comparative advantage

Inability of a nation to produce a good more efficiently than other nations but an ability to produce that good more efficiently than it does any other good.

factor proportions theory of trade

Trade theory stating that countries produce and export goods that require resources {factors) that are abundant and import goods that require resources in short supply.

international product life cycle

Theory stating that a company will begin by exporting its product and later undertake foreign direct investment as the product moves through its life cycle.

new trade theory

Trade theory stating that (1) there are gains to be made from special­ ization and increasing economies of scale, (2) the companies first to market can create barriers to entry, and (3) government may play a role in assisting its home companies.

first-mover advantage

Economic and strategic advantage gained by being the first company to enter an industry.

national competitive advan­tage theory

Trade theory stating that a nation's competitiveness in an industry depends on the capacity of the industry to innovate and upgrade.

Porter diamond

Film Strategy, Structure, Rivalry, Government and Chance