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Ch 3 GEB Def
| Term | Definition |
|---|---|
| Importing | Buying products from another country |
| Exporting | Selling products to another country |
| Free trade | The movement of goods and services among nations without political 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 nations exports compared to its imports over a particular period |
| Trade surplus | A favorable balance of trade; occurs when the value of a country’s exports exceeds that of its imports |
| Trade deficit | An unfavorable balance of trade; occurs when the value of a country’s imports exceeds that of its exports |
| Balance of payment | 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, military expenditures, and foreign investment |
| Dumping | Selling products in a foreign country at lower prices than those charges in the producing company |
| Licensing | A global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a few (a royalty) |
| Contract manufacturing | A company’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 | 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 markers products in many different countries and has multinational stock ownership and multinational management |
| Sovereign wealth funds | 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 maybe involved, each trading goods for good or services for services |
| Trade protectionism | The use of government regulations to limit the import of goods and services |
| Tariff | A tax imposed on import |
| 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 | A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions |
| World trade organization | The international organization that replaced the GenerL Agreement on Tariffs and Trade, and was assigned the duty to mediate trade disputes among nations |
| Common markets | A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange; also called a trading bloc. n example is the European Union |
| Favorable balance of payments | More money flowing into the country than out |
| Unfavorable balance of payments | More money flowing out of the country than coming in |
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Flmntx88
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