Chapter 4

Question 1

globalization

Answer 1

process by which the world economy is becoming a single interdependent system

Question 2

import

Answer 2

product made or grown abroad but sold domestically

Question 3

export

Answer 3

product made or grown domestically but shipped and sold abroad

Question 4

North American Free Trade Agreement (NAFTA)

Answer 4

agreement to gradually eliminate tariffs and other trade barriers among the United States, Canada, Mexico

Question 5

European Union (EU)

Answer 5

organization for economic, social, and security cooperation among European nations

Question 6

Association of Southeast Asian Nations (ASEAN)

Answer 6

organization for economic, political, social, and cultural cooperation amond Southeast Asian nations

Question 7

general agreement on tariffs and trade (GATT)

Answer 7

international trade agreement to encourage the multilateral reduction of elimination of trade barriers

Question 8

World Trade Organization (WTO)

Answer 8

organization through which member nations negotiate trading agreements and resolve disputes about trade policies and practices

Question 9

balance of trade

Answer 9

economic value of all products a country exports minus the economic value of all products it imports

Question 10

trade deficit

Answer 10

situation in which a country’s imports exceed its exports, creating a negative balance of trade

Question 11

trade surplus

Answer 11

situation in which a country’s exports exceed its imports, creating a positive balance of trade

Question 12

balance of paymnets

Answer 12

flow of money into or out of a country

Question 13

exchange rate

Answer 13

rate at which the currency of one nation can be exchanged for the currency of another nation

Question 14

euro

Answer 14

common currency shared among most of the members of the European Union (excluding Denmark, Sweden, and the United Kingdom)

Question 15

absolute advantage

Answer 15

abiltiy to produce something more efficiently than any other country

Question 16

comparative advantage

Answer 16

ability to produce some products more efficienly than others

Question 17

national competitive advantage

Answer 17

international competitive advantage stemming from a combination of factor conditions, demand conditions, related and supporting industries, and firm strategies, structures, and rivalries

Question 18

outsourcing

Answer 18

practice of paying suppliesrs and distributors to perform certain business processes or to provide needed materials or services

Question 19

offshoring

Answer 19

practice of outsourcing to foreign countries

Question 20

exporter

Answer 20

form that distributes and sells products to one or more foreign countries

Question 21

importer

Answer 21

firm that buys products in foreign markets and them imports them for resale in its home country

Question 22

international firm

Answer 22

firm that conducts a significant portion of its business in foreign countries

Question 23

multinational firm

Answer 23

form that designs, produces, and markets products in many nations

Question 24

independent agent

Answer 24

foreign individual or organiztion that agrees to represent an exporter’s interests

Question 25

licensing arrangement

Answer 25

arrangement in which firms choose foreign individuals or organizations to manufacture or market their products in another country

Question 26

branch office

Answer 26

foreign office set up by an international or multinational firm

Question 27

strategic alliance

Answer 27

arrangement (also called joint venture) in which a company finds a foreign partner to contribute approximately half of the resources needed to establish and operate a new business in the partner's country

Question 28

foreign direct investment (FDI)

Answer 28

arrangement in which a firm buys or establishes tangible assets in another country

Question 29

quota

Answer 29

restriction on the number of products of a certain type that can be imported into a country

Question 30

embargo

Answer 30

goverment order banning exportation and/or importation of a particular product or all products from a particular country

Question 31

tariff

Answer 31

tax levied on imported products

Question 32

subsidy

Answer 32

goverment payment to help a domestic business compete with foreign firms

Question 33

protectionism

Answer 33

practice of protecting domestic business agains foreign competition

Question 34

local content law

Answer 34

law requireing that products sold in a particular country be at least partly made there

Question 35

business practice law

Answer 35

law or regulation governing business practices in given countries

Question 36

cartel

Answer 36

association of producers whose purpose is to control supply and prices