Term
| Why should nations trade with other nations? |
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Definition
1. No country is self-sufficient
2. Other countries need products that prosperous countries produce.
3. Natural resources and technological skills are not distributed evenly around the world. |
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Term
| What is the theory of comparative advantage? |
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Definition
| The theory of comparative advantage contends that a country should make and then sell those products it produces most efficiently but buy those it cannot produce as efficiently. |
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Term
| What is absolute advantage? |
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Definition
| Absolute advantage means that a country has a monopoly on a certain product or can produce the product more efficiently than any other country. There are few examples of absolute advantage in the global market today. |
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Term
| What kinds of products can be imported and exported? |
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Definition
| Though it is not necessarily easy, just about any kind of product can be imported or exported. |
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Term
| What terms are important in understanding world trade? |
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Definition
Exporting is selling products to other countries.
Importing is buying products from another country.
The balance of trade is the total value of a nation's exports compared to its imports measured over a particular period.
The balance of payments is the balance of trade plus other money flows such as tourism and foreign aid.
Dumping is selling products in a foreign country at lower prices than those charged in the producing country. |
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Term
| What are some ways in which a company can engage in global business? |
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Definition
| Ways of entering world trade include licensing, exporting, franchising, contract manufacturing, joint ventures and strategic alliances, and direct foreign investment. |
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Term
| How do multinational corporations differ from other companies that participate in global business? |
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Definition
| Unlike companies that only export or import, multinational corporations also have manufacturing facilities or other physical presence abroad. |
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Term
| What are some of the forces that can discourage participation in global business? |
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Definition
| Potential stumbling blocks to global trade include sociocultural forces, economic and financial forces, legal and regulatory forces, and physical and environmental forces. |
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Term
| What is trade protectionism? |
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Definition
| Trade protectionism is the use of government regulations to limit the import of goods and services. Advocates believe it allows domestic producers to grow, producing more jobs. The key tools of protectionism are tariffs, import quotas, and embargoes. |
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Term
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Definition
| Tariffs are taxes on foreign products. Protective tariffs raise the price of foreign products and protect domestic industries; revenue tariffs raise money for the government. |
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Term
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Definition
| An embargo prohibits the importing or exporting of certain products. |
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Term
| Is trade protectionism good for domestic producers? |
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Definition
That is debatable. Trade protectionism offers pluses and minuses.
+Advocates believe it allows domestic producers to grow, producing more jobs.
-Natural resources and technological skills are not distributed evenly around the world. |
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Term
| Why do governments continue such practices as trade protectionism? |
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Definition
| The theory of mercantilism started the practice of trade protectionism and it has persisted, though in a weaker form, ever since. |
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Term
| What is offshore outsourcing? Why is it a major concern for the future? |
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Definition
| Out sourcing is the purchase of goods and services from outside a firm rather than providing them inside the company. Today, more businesses are outsourcing manufacturing and services offshore. Many fear that growing numbers of jobs in the U.S. will be lost due to offshore outsourcing and that the quality of products produced could be inferior. |
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