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Intro to Bus. Ch. 3

Chapter 3 Vocab

Importing Buying products from another country.
Exporting Selling products to another country.
Free Trade The movement of goods and services among nations without political or economic barriers.
Comparative Advantage Theory Theory that states that a country should sell to other countries those products that it produces most effectively and efficiently, and buy from other countries those products that it cannot produce as effectively or efficiently.
Absolute Advantage The advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries.
Balance of Trade The total value of a nation's exports compared to its imports measured over a particular period.
Trade Surplus or Favorable Balance of Trade Occurs when the value of a country's exports exceeds that of its imports.
Trade Deficit or Unfavorable Balance of Trade Occurs when the value of a country's imports exceeds that of its exports.
Balance of Payments The difference between money coming into a country(from exports) and money leaving the country(for imports) plus money flows from other factors such as tourism, foreign aid and investment, and military expenditures.
Dumping Selling products in a foreign country at lower prices than those charged in the producing country.
Licensing A global strategy in which a firm(the licensor) allows a foreign company(the licensee) to produce its product in exchange for a fee(a royalty).
Franchising Franchising is a contractual agreement whereby someone with a good idea for a business sells others the rights to use the business name and sell a product or service in a given territory in a specified manner.
Contract Manufacturing A foreign country's production of private-label goods to which a domestic company then attaches its brand name or trademark; part of the broad category of outsourcing.
Joint Venture A partnership in which two or more companies(often from different countries) join to undertake a major project.
Strategic Alliance A long-term partnership between two or more companies established to help each company build competitive market advantages.
Foreign Direct Investment(FDI) The buying of permanent property and businesses in foreign nations.
Foreign Subsidiary A company owned in a foreign country by another company, called the parent company.
Multinational Corporation An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management.
Sovereign Wealth Funds(SWFs) Investment funds controlled by governments holding large stakes in foreign companies.
Exchange Rate The value of one nation's currency relative to the currencies of other countries.
Devaluation Lowering the value of a nation's currency relative to other currencies.
Countertrading A complex form of bartering in which several countries may be involved, each trading goods for goods or services for services.
Floating Exchange Rates That currencies "float" in value according to the supply and demand for them in the global market for currency.
Trade Protectionism The use of government regulations to limit the import of goods and services.
Tariff A tax imposed on imports.
Protective Tariffs(Import Taxes) Raise the retail price of imported products so that domestic goods are more competitively priced.
Revenue Tariffs Designed to raise money for the government.
Import Quota A limit on the number of products in certain categories that a nation can import.
Embargo A complete ban on the import or export of a certain product, or the stopping of all trade with a particular country.
General Agreement on Tariffs and Trade(GATT) A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions.
World Trade Organization(WTO) The international organization that replaced the General Agreement on Tariffs and Trade and was assigned the duty to mediate trade disputes among nations.
Common Market or Trading Bloc A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange. Ex. European Union
North American Free Trade Agreement(NAFTA) Agreement that created a free-trade area among the United States, Canada, and Mexico.
Outsourcing The process whereby one firm contracts with other companies, often in other countries, to do some or all of its functions.
Created by: 1626187242



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