1. Define: importing
    Buying products from another country (p. 60)
  2. Define: exporting
    selling products to another country (p. 61)
  3. Define: free trade
    the movement of goods and services among nations without political or economic barriers (p. 61)
  4. Define: comparative advantage theory
    theory that states that a country should sell to other countries those products that it produces most effectively and efficiently, and buy from other countries those products that it cannot produce as effectively or efficiently (p. 61)
  5. Define: absolute advantage
    the advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries (p. 62)
  6. Define: balance of trade
    the total value of a nation's exports compared to its imports measured over a particular period (p. 64)
  7. Define: trade surplus
    a favorable balance of trade; occurs when the value of a country's exports exceeds that of its imports (p. 64)
  8. Define: trade deficit
    An unfavorable balance of trade; occurs when the value of a country's imports exceeds that of its exports (p. 64)
  9. Define: balance of payments
    the difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment (p. 65)
  10. Define: dumping
    selling products in a foreign country at lower prices than those charged in the producing country (p. 65)
  11. Define: licensing
    a global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (a royalty) (p. 66)
  12. Define: contract manufacturing
    a foreign country's production of private-label goods to which a domestic company then attaches its brand name or trademark; part of the broad category of outsourcing (p. 69)
  13. Define: joint venture
    a partnership in which two or more companies (often from different countries) join to undertake a major project (p. 70)
  14. Define: strategic alliance
    a long-term partnership between two or more companies established to help each company build competitive market advantages (p. 70)
  15. Define: foreign direct investment (FDI)
    the buying of permanent property and businesses in foreign nations (p. 70)
  16. Define: foreign subsidiary
    a company owned in a foreign country by another company, called the parent company (p. 70)
  17. Define: multinational corporation
    an organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management (p. 71)
  18. Define: sovereign wealth funds (SWFs)
    investment funds controlled by governments holding large stakes in foreign companies (p. 71)
  19. Define: exchange rate
    the value of one nation's currency relative to the currencies of other countries (p. 74)
  20. Define: devaluation
    lowering the value of a nation's currency relative to other currencies (p. 74)
  21. Define: countertrading
    a complex form of bartering in which several countries may be involved, each trading goods for goods or services for services (p. 74)
  22. Define: trade protectionism
    the use of government regulations to limit the import of goods and services (p. 76)
  23. Define: tariff
    a tax imposed on imports (p. 76)
  24. Define: import quota
    a limit on the number of products in certain categories that a nation can import (p. 76)
  25. Define: embargo
    a complete ban on the import or export, or the stopping of all trade with a particular country (p. 76)
  26. Define: General Agreement on Tariffs and Trade (GATT)
    a 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions (p. 77)
  27. Define: World Trade Organization (WTO)
    the international organization that replaced the General Agreement on Tariffs and Trade, and was assigned the duty to mediate trade disputes among nations (p. 77)
  28. Define: common market
    a regional group of countries that have a common external tariffs, and a coordination of laws to facilitate exchange; also called a trading bloc. An example is the European Union (p. 77)
  29. Define: North American Free Trade Agreement (NAFTA)
    Agreement that created a free-trade area among the United States, Canada, and Mexico (p. 78)
Card Set
key terms from chapter three - Nickels, W.G., 2010. Understanding Business. McGraw-Hill Companies, Inc: New York. ed9, p. 58-87.