Chapter 3

Question 1

Multilateral Development Bank (MDB)

Answer 1

an internationally supported bank that provides loans to developing countries to help them grow

Question 2

International Monetary Fund

Answer 2

international bank with 188 member nations that makes short term loans to developing countries experiencing balance of payment deficits.

Question 3

Trading Company

Answer 3

provides a link between buyers and sellers in different countries

Question 4

Countertrade

Answer 4

an international barter transaction

Question 5

Multinational Enterprise

Answer 5

a firm that operates on a worldwide scale without ties to any specific nation or region

Question 6

Strategic Alliance

Answer 6

a partnership formed to create competitive advantage on a worldwide basis

Question 7

Joint Venture

Answer 7

is a partnership formed to achieve a specific goal or to operate for a specific period of time

Question 8

Letter of Credit

Answer 8

issued by a bank on request of an importer stating that the bank will pay an amount of money to a stated beneficiary

Question 9

Bill of Lading

Answer 9

document issued by a transport carrier to an exporter to prove that merchandise has been shipped

Question 10

Draft

Answer 10

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

Question 11

Licensing

Answer 11

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

Question 12

Common Market of the Southern Cone (MERCOSUR)

Answer 12

established in 1991 under the treaty of asuncion to unite argentina, brazil, paraguay, and uruguay as a free-trade alliance; columbia, ecuador, peru, bolivia, and chile later joined as associates

Question 13

Trans-Pacific Partnership (TPP)

Answer 13

australia, brunei darussalam, chile, malaysia, new zealand, peru, singapore, vietnam, and the US formed the TPP

Question 14

Association of Southeast Asian Nations

Answer 14

headquarters include: Jakarta, and indonesia was established in 1967 to promote political, economic and social cooperation among its seven member countries:indonesia, malaysia, philippines, singapore, thailand, brunei, and vietnam. with three new member…cambodia, laos and mynanmar

Question 15

Central American Free Trade Agreement

Answer 15

CAFTA-created in 2003 by the US and 4 central american countries: el salvador, guatemala, honduras, and nicaragua. And then became CAFTA-DR when dominican republic joined in 2007

Question 16

North America Free Trade Agreement

Answer 16

NAFTA-joined the US with its first and second largest export trading partners, canada and mexico

Question 17

European Union

Answer 17

formed in 1957 by france, fed republic of germany, italy, belgium, netherlands, and luxembourg

Question 18

Economic Community

Answer 18

is an organization of nations formed to promote the free movement of resources and products among its members and to create economic policies

Question 19

World Trade Organization (WTO)

Answer 19

powerful successor to GATT that incorporates trade in goods, services, and ideas

Question 20

GATT

Answer 20

general agreement on tariffs and trade…an international organization of 153 nations dedicated to reducing or eliminating tariffs and other barriers to world trade

Question 21

IMF

Answer 21

international monetary fund…is an international bank with 187 member nations, expected a gradual global growth to continue in 2012 in both advanced and emerging countries

Question 22

Reasons against trade restrictions

Answer 22

higher prices for customers
restriction of consumer’s choice
misallocation of international resources
loss of jobs

Question 23

Reasons for trade restrictions

Answer 23

to equalize a nation’s balance of payments
to protect new or weak industries
to protect national security
to protect the health of citizens
to retaliate for another nation’s trade restrictions
to protect domestic jobs

Question 24

Foreign exchange control

Answer 24

a restriction on the amount of a particular foreign currency that can be purchased or sold

Question 25

Currency devaluation

Answer 25

the reduction of the value of a nation’s currency relative to the currencies of other countries

Question 26

Import duty (tariff)

Answer 26

a tax levied on a particular foreign product entering a country

Question 27

Non tariff barrier

Answer 27

a non tax measure imposed by a government to favor domestic over foreign suppliers

Question 28

Import quota

Answer 28

a limit on the amount of a particular good that may be imported into a country during a given period of time

Question 29

Embargo

Answer 29

a complete halt to trading with a particular nation or in a particular product

Question 30

Balance of payments

Answer 30

the total flow of money into a country minus the total flow of money out of that country over some period of time

Question 31

Balance of trade

Answer 31

the total value of a nation’s exports minus the total value of its imports over some period of time

Question 32

trade deficit

Answer 32

a negative balance of trade

Question 33

Exporting

Answer 33

selling and shipping raw materials or products to other nations

Question 34

Importing

Answer 34

purchasing raw materials or products in other nations and bringing them into one’s own country

Question 35

International business

Answer 35

all business activities that involve exchanges across national boundaries

Question 36

Absolute advantage

Answer 36

the ability to produce a specific product more efficiently than any other nation

Question 37

Comparative advantage

Answer 37

the ability to produce a specific product more efficiently than any other product