CHAPTER 3 INTERNATIONAL BUSINESS

Question 1

reasons for and against international trade

Answer 1

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

AGAINST
Higher prices for consumers
Restriction of consumers’ choices
Loss of jobs
Misallocation of international resources
To retaliate for another country’s trade restrictions

Question 2

balance of payments

Answer 2

A summary of a country’s international financial transactions showing the difference
between the country’s total payments to and its total receipts from other countries

Question 3

balance of trade

Answer 3

The difference between the value of a country’s exports and the value of its imports during
a specific time.

Question 4

devaluation

Answer 4

A lowering of the value of a nation’s currency relative to other currencies.

Question 5

dumping

Answer 5

The practice of charging a lower price for a product in foreign markets than in the firm’s home market

Question 6

exchange controls

Answer 6

Laws that require a company earning foreign exchange (foreign currency) from its
exports to sell the foreign exchange to a control agency, such as a central bank.

Question 7

floating exchange rate

Answer 7

A system in which prices of currencies move up and down based upon the demand
for and supply of the various currencies

Question 8

free trade zone

Answer 8

An area where the nations allow free, or almost free, trade among each other while
imposing tariffs on goods of nations outside the zon