chapter 4

A free-trade area between the U.S. and several Central American countries is known as the _______________________________________.

CAFTA-DR

The ____________________________________________is the accord that removes trade barriers among Canada, Mexico, and the United States.

NAFTA

U. S. firms operating abroad must conform to:

U.S. law host country law international regulations

The ____________________________________is the institution that succeeded GATT in monitoring and enforcing trade agreements.

WTO

The reduction in value of a country's currency is called _______________________.

devaluation

If a country tries to penetrate foreign markets by selling goods or services abroad at a price lower than it charges in its own domestic market, it is engaged in ___________________________.

dumping

______________________________________ describes the highest valued alternative foregone in pursuit of an activity.

opportunity cost

A complete ban on importing certain products is called an_____________________.

embargo

The _______________________of a country is based on the rate at which its currency is valued against other currencies.

exchange rate

______________________ is selling domestically produced products abroad.

export

As a result of U. S. ability to grow wheat, there is a surplus. What is the most profitable short-term method to handle the surplus?

export the wheat

true or false A complete ban on certain products is called a tariff.

false

true or false A country will decrease their level of risk as they increase their level of involvement in global business.

false

true or false A strong dollar helps the United States create a favorable balance of trade.

false

true or false A tariff produces revenue for the government of the importing country.

false

true or false All of the world's major currencies are based on a fixed standard: the price of gold.

false

true or false Dumping refers to a practice of countries carrying their waste products out to sea beyond their international boundary and disposing of them in the ocean.

false

true or false Foreign trade is less critical to the United States than to countries such as Mexico.

false

true or false If a firm allows a foreign company to produce and distribute its products or use its trademarks or patents it is engaged in dumping.

false

true or false In general, the greater degree of control a company exercises through foreign investment, the less risk the company faces.

false

true or false Most companies opt out of establishing an overseas division.

false

true or false One disadvantage of subcontracting is that subcontractors do not understand local culture, contacts, and regulations.

false

true or false The European Union (EU) is composed of only western European countries in order to avoid trading or job-related conflicts.

false

true or false The International Monetary Fund was established to make long-term loans to countries requiring assistance in conducting trade.

false

true or false The U.S. mainly trades with Western Europe over other areas of the world.

false

true or false The number-one trading partner of the United States is now China.

false

true or false The overall flow of money into or out of a country comprises that country's balance of trade.

false

true or false The value of currency rarely fluctuates.

false

true or false Trading with other countries increases a company's dependence on economic conditions in its home market.

false

true or false Virtually all successful global exporters are large firms.

false

true or false When a nation's imports exceeds its exports, it is said to have a favorable balance of trade.

false

A ____________________________ is a cooperative agreement that allows a company to share risks, costs, profits, and management responsibilities with one or more partners in the host country.

joint venture

A _______________________________ occurs when a negative difference exists between what a country exports and what it imports.

trade deficit

When a country exports more goods than it imports, it is experiencing a:

trade deficit

When a country exports more than it imports, there is a ______________________________________.

trade surplus

true or false A country's size, per-capita income, and stage of economic development are among the economic factors to consider when evaluating it as a candidate for an international business venture.

true

true or false A favorable balance of payments means that there is a net money flow into the nation.

true

true or false A positive balance of trade is referred to as a balance surplus.

true

true or false Absolute advantage occurs when a firm has the ability to produce one good more cheaply than other goods.

true

true or false An embargo imposes a total ban on importing a specified product or even a total halt to trading with a particular country.

true

true or false Developing nations often prove to have higher GDP growth rates.

true

true or false Foreign trade makes up a large portion of American's business activity.

true

true or false Franchising is an especially appropriate means for selling services abroad.

true

true or false In a free-trade area, the participants have no tariffs or trade restrictions.

true

true or false Joint ventures allow companies to share risks, costs, profits, and management responsibilities with one or more host country nationals.

true

true or false NAFTA created a free-trade zone between Canada, Mexico, and the U. S.

true

true or false The European Union is a common market.

true

true or false The General Agreement on Tariffs and Trade (GATT) has been succeeded by the World Trade Organization (WTO).

true

true or false The International Monetary Fund was created to promote trade through financial cooperation.

true

true or false The United States is the world's largest importer.

true

true or false The World Bank is also known as the International Monetary Fund (IMF).

true

true or false Trading with other countries spreads out risk for multinational firms.

true

true or false Where obstacles to multinational economic integration still exist, the trend is toward greater free trade.

true

true or false An unfavorable balance of trade results in a trade deficit.

ture

Business firms that invest in foreign countries may be contributing too their own country's what?

unfavorable balance of payments

A floating exchange rate:

varies according to market conditions

The ______________________________ makes long-term loans for economic development projects.

world bank

The ______________________________________is an international trade accord to reduce tariffs and standardize trading rules worldwide.

GATT

The _________________________________ is involved with making short-term loans to countries to promote international trade.

IMF

The lender of last resort for troubled nations is the:

International Monetary Fund (IMF)

Which of the following does NOT affect the U. S. balance of payments?

congressional budget actions

___________________________is the relationship between the flow of money into and out of a country.

balance of payment

Specialization of production among nations:

Allows each nation to focus on producing what it does best. Means consumers have access to the most efficient producers of goods and services they want to buy. Is the basis of international trade. Is a major means of raising the standard of living for people throughout the world.

The federation of European countries that seeks to protect and promote trade among them is called the___________________________________________.

European union

A(n) _______________________ occurs when a firm produces more goods using fewer resources than other firms.

comparative damage

If a nation has the ability to produce a product at lower cost than other countries, that nation has:

a comparative advantage

The price of imported goods is increased by:

a devaluation of a nation's currency

A firm has a _______________________ when they can produce one good more cheaply than other goods.

absolute advantage

A country that is the sole producer of a product has:

an absolute advantage

At the end of the year, a country with limited resources determined that the amount of goods it imported was approximately 30 percent more than the amount of domestically produced goods it exported. The country has experienced:

an unfavorable of trade

___________________________is the relationship between a country's exports and imports.

balance or trade

country can supply a product more efficiently and at lower cost than it can supply other goods compared with other countries.

comparative advantage

Buying foreign goods and raw materials is defined as _______________________.

import

A corporation that operates, produces, and/or markets on an international level is known as a_______________________________.

multinational corporation

In order to help domestic industries, a ________________________ limits the number of products in certain categories that can be imported.

quota

To help reverse an unfavorable balance of payments, a country might:

start a campaign to encourage foreign tourists

______________________________occurs when a firm hires a local company to produce, distribute, or sell a good or service in a foreign market.

subcontracting

A __________________________ is a tax or surcharge on imports.

tariff

A tax on imports is a(n):

tariff