Chapter 3 Flashcards
(43 cards)
Term
Definition
Absolute advantage
the ability to produce a specific product more efficiently than any other country
Comparative advantage
the ability to produce a specific product more efficiently than any other product
Importing
the buying of raw materials or products from other countries
Foreign-exchange control
a restriction on the amount of a particular foreign currency that can be purchased or sold
Exporting
the selling and shipping of raw materials or products to other countries
Currency devaluation
a drop in the value of one country’s currency relative to other currencies
Currency exchange rate
the value of one currency in relation to another
Trade surplus
the value of exports is greater than the value of imports
Balance of trade
the value of exports minus the value of imports for a country
Balance of payments
the total flow of money into a country minus the total flow of money out of that country over some period of time, usually every quarter or calendar year
Trade deficit
the value of exports is less than the value of imports
Tariffs
tax on a particular foreign product being imported into a country often used interchangeably with customs or import duty
Embargo
a complete halt to trading with a particular country or in a particular product
World Trade Organization
powerful successor to the General Agreement on Tariffs and Trade (GATT) that incorporates trade in goods, services, and ideas
Tries to take down trade barriers and open up negotiations
Quotas
limit on the amount of a particular good that may be imported into a country during a given period of time
International Monetary Fund
an international bank that makes short-term loans to developing countries experiencing balance-of-payment deficits
Bill of lading
document issued by a transport carrier to an exporter to prove that merchandise has been shipped
Economic community
organization of countries formed to promote the free movement of resources and products among its members (also referred to as regional economic integration)
World Bank
the most familiar type of multilateral development bank; provides low-interest loans, interest-free credit, and grants to developing countries
Letter of credit
document issued by a bank on request of an importer stating that the bank will pay an amount of money to a stated beneficiary
Draft
document 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
International direct investment
method for entering international business that provides complete control over operations. Options for international direct investment include acquisitions, joint ventures, and creation of totally owned facilities in foreign markets
