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Chapter 3
| Question | Answer |
|---|---|
| International business | All business activities that involve exchanges across national boundaries |
| Absolute advantage | The ability to produce a specific product more efficiently than any other nation |
| Comparative advantage | The ability to produce a specific product more efficiently than any other product |
| Exporting | Selling and shipping raw materials or products to other nations |
| Importing | Purchasing raw materials or products in other nations and bringing them into one’s own country |
| Balance of trade | The total value of a nation’s exports minus the total value of its imports over some period of time |
| Trade deficit | A negative (unfavorable) balance of trade—imports exceed exports in value |
| Balance of payments | The total flow of money into a country minus the total flow of money out of that country over a period of time |
| Import duty (tariff) | A tax levied on a particular foreign product entering a country |
| Dumping | The exportation of large quantities of a product at a price lower than that of the same product in the home market |
| Nontariff barriers | A nontax measures imposed by a government to favor domestic over foreign suppliers |
| Import quota | A limit on the amount of a particular good that may be imported during a given time |
| Embargo | A complete halt to trading with a particular nation or in a particular product |
| Foreign exchange control | A restriction on amount of foreign currency that can be purchased or sold |
| Currency devaluation | The reduction of the value of a nation’s currency relative to the currencies of other countries |
| General Agreement of Tariffs and Trade (GATT) | International organization of 153 nations dedicated to reducing or eliminating tariffs and other trade barriers |
| World Trade Organization (WTO) | Powerful successor to GATT that incorporates trade in goods, services, and ideas |
| Economic community | An organization of nations formed to promote the free movement of resources and products among its members and to create common economic policies |
| Licensing | A contractual agreement in which one firm permits another to produce and market its product and use its brand name in return for a royalty or other compensation |
| Letter of credit | Issued by a bank on request of an importer stating that the bank will pay an amount of money to a stated beneficiary |
| Bill of lading | Issued by a transport carrier to an exporter to prove merchandise has been shipped |
| Draft | Issued by the exporter’s bank, ordering the importer’s bank to pay for the merchandise, thus guaranteeing payment once accepted by the importer’s bank |
| Strategic alliances | Partnerships formed to create competitive advantage on a worldwide basis |
| Trading companies | Firms that provide a link between buyers and sellers in different countries |
| Countertrade | An international barter transaction |
| Multinational enterprise | A firm that operates on a worldwide scale without ties to any specific nation or region |
| The Export-Import Bank of the United States (Eximbank) | An independent agency of the U.S. government whose function it is to assist in financing the exports of American firms |
| Multilateral Development Bank (MDB) | An internationally supported bank that provides loans to developing countries to help them grow |
| The International Monetary Fund (IMF) | An international bank with 186 member nations that makes short-term loans to developing countries experiencing balance-of-payment deficits |
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