Chapter 6.3 Flashcards
(16 cards)
What is globalization?
Globalization is the increase in worldwide trade, movement of people, and capital, making it easier to trade goods, services, and people across countries.
What are the reasons for globalization?
Free trade agreements, improved transportation, and the rise of developing countries that can trade globally.
What opportunities does globalization present for businesses?
Access to wider markets, cheaper labor, cheaper raw materials, and the ability to open factories in other countries.
What are some threats to businesses from globalization?
Increased competition from cheaper foreign competitors, loss of employees to international firms, and potential closure of domestic businesses.
What is an import tariff?
A tax paid on goods imported into a country, leading to higher costs for businesses and consumers.
What is an import quota?
A limit on the quantity of goods that can be imported or exported, leading to reduced supply and higher prices.
What are multinational companies?
Firms that operate in more than one country, allowing access to new markets, spreading risk, and maintaining competitiveness.
What are the advantages of multinational companies?
They create jobs, increase tax income, improve local reputation, and offer a wider choice of goods to consumers.
What are the disadvantages of multinational companies?
They can force local businesses to close, overuse resources, repatriate profits, and offer fewer opportunities for skilled local jobs.
What is an exchange rate?
The price of one country’s currency in terms of another country’s currency.
What happens when a currency appreciates?
The country’s goods become more expensive to export, reducing demand, but imports become cheaper.
What happens when a currency depreciates?
The country’s goods become cheaper to export, increasing demand, but imports become more expensive.
What is the effect of currency appreciation on exports?
Exports become more expensive and less competitive, leading to lower demand.
What is the effect of currency depreciation on exports?
Exports become cheaper and more competitive, leading to higher demand.
Why might governments use import tariffs?
To protect domestic businesses from foreign competition by making imported goods more expensive.
What is the effect of exchange rate fluctuations on business decisions?
Exchange rate fluctuations make it difficult to predict future costs and revenues, affecting business planning.
