Chapter 3

Balance of Trade

A basic measure of the difference between a nation's exports and imports, including goods and services.

Balance of Payments

A measure of total flow of money into or out of a country. It includes foreign borrowing and lending.

Globalization

Economies around the world have become more interdependent and this is what we call

Foreign Direct Investment

Firms acquire foreign firms or develop new facilities from ground up in foreign countries.

Reduced Risk

Global trade reduces dependence on one economy, lowering the risk for multinational firms (Another reason for international trade).

Partnership

In the context of foreign direct investment, it is a formal, long-term agreement.

More

In the context of global trade, a balance of payments deficit means that _______ money flows out than in.

Skilled

In the context of international trade, India, China, and the Philippines attract multibillion-dollar investments because they have a large cohort of technically _________ university graduates who work for about one-fifth the pay of comparable American workers.

Better Communication

Increased competition and shifting opportunities results in

New Markets

International trade helps growth through entering what? (new customers!)

Access to Factors of Production

International trade helps out some of the resource imbalances among nations and takes advantage of international specialized suppliers.

Inflow of Innovation

International trade is a source of new ideas for companies (Another reason for international trade). Ex. Negacho, a food and beverage company, introduced a new flavor of potato chips called South Indian Chillis. It received a positive response from consumers, which prompted Brex Mex, another food company, to introduce its own Szechuan flavored chips. In this scenario, which of the following is most likely to have influenced Brex Mex to produce a product similar to Negacho's?

Joint Venture

Is an agreement between two or more companies where they pool their resources for the purpose of accomplishing a specific task (a new project or any other business activity). Not a merger.

Exporting

It is the most basic level of international market development. Selling products in foreign nations that have produced or grown domestically.

Exchange Rates

Measure the value of one nation's currency relative to the currency of other nations.

Balance of Trade, Balance of Payments and Exchange Rates

Measuring the impact of international trade on individual nations requires a clear understanding of what (3 of them).

BRIC Countries

Migration of labor-intensive, low wage manufacturing jobs away from what country has benefited their economic growth?

Vietnam, Philippines and Bangladesh

Migration of labor-intensive, low-wage manufacturing jobs away from China make what countries beneficiaries of economic growth.

Two Years

Ministers of the WTO meet every _________ years to address current world trade issues.

Protectionism

National policies designed to restrict international trade. Fewer trade barriers to help a country import/export more goods.

International trade

Offers companies an invaluable source of new ideas.

Opportunity Cost

Opportunity of giving up the second-best choice when making a decision.

Foreign Licensing and Franchising

Organization (licensor) granting a foreign firm the rights to produce and market products and/or to use its trademark in a defined geographical area. Allows licensor to expand internationally at low cost.

Limited access to factors of production

Regency Placade, a renowned European electronics company, wants to set up a subsidiary in Finim, an Asian country. After conducting a survey, the company finds that Finim lacks the resources required for production. Therefore, Regency Placade decides to abandon the idea. In this scenario, which of the following most likely affected Regency Placade's plan?

Legal Differences

Remurio Inc., an African multinational company, wants to import raw materials from Infigerd, an Asian country. However, the company can import only a certain quantity of raw materials because of trade restrictions imposed by Infigerd. In this scenario, Remurio Inc. is most likely facing the barrier of _____.

Trade Deficit

The total value of the goods exported by Maulini, a South American country, in the last fiscal year was lower in comparison to the total value of the goods imported by it. Given this information, Maulini had a _____ in the last fiscal year.

Trade Surplus

Total value of exports is higher than the total value of imports.

Trade Deficit

Total value of imports is higher than the total value of exports.

Trade Restrictions

Were created to protect national security interests.

Promoting Global Trade

What is a function of the International Monetary Fund (IMF)?

Comparative Advantage

When a country makes products at a lower opportunity cost than other countries. Ex. An Asian country that produces quality automobiles with little opportunity cost compared to other countries

Absolute Advantage

When a country produces more of a product than other nations using the same amount of resources. Ex. Ithilium, a European country, is able to produce more electronics than Kilim, a North American country, even though both countries use the same amount of resources. Given this information, it can be deduced that Ithilium has a(n):

India

________ (Country) subscriber base for cell phones has grown explosively over the past five years.

Increased Global Business Opportunities

Access to technology and decrease in barriers to trade has

Political Climate

Also effects attractiveness of market. No one is investing in a country in political turmoil.

Sociocultural Differences

Among cultures in language, attitudes and values. Is vital to understand and respond and requires cultivating firsthand knowledge, and practiving extreme sensitivity.

Gain or Lose

As technology changes, nations may ___________ comparative advantage in various industries.

Brazil, Russia, India and China

BRIC countries

Importing

Buying products domestically that have been produced or grown in foreign countries.

Higher GDP

Compared to the United States, China and India have _________ rates.

Foreign Outsourcing

Contracting with foreign suppliers to produce products. Usually at a fraction of the cost of domestic production.

Infrastructure

Country's physical facilities that support economic activity.

Economic Differences

Critical to understand and evaluate. Population, per capita income, economic growth rate, currency exchange.