Midterm Exam Study Guide 20T1

As you prepare for the exam, pay special attention to the following terms and concepts:
International trade

Voluntary exchange of goods, services, or assets between a person or organization in one country
and a person or organization in another country

Import and export

 Exporting - selling of products made in one's own country for use or resale in other countries
 Importing - buying products made in other countries for use or resale in one’s own country

Exporting/Importing activities divided into two categories,

1.trade in goods– tangible products (merchandise exports/imports)
2. trade in service – intangible products (service exports/imports)
Tangible goods
physical products defined by the ability to be touched

Visible and invisible trade

Visible trade- Exports and imports of physical goods
Invisible trade- export and import of physically intangible items such as services
Just-in-time systems
Systems in which suppliers are expected to deliver necessary inputs just as they are needed.

Era of Globalization
The first era of globalization began in the 19th century

Arbitrage
riskless purchase of a product in one market for immediate resale in a second market to profit from price
differences between the markets

Arctic ice cap

floats on top of the Arctic Ocean

Consequences of the diminishing Arctic ice cap –

-Two Arctic Trade/Transportation Routes: Northwest Passage & Northern Sea Route

-Development of trade corridors

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 -Exploration/Exploitation of the mineral wealth amongst the waters

-Tension between the Arctic Council over territory borders

Arctic Council
- A multilateral organization composed of representatives
from the eight circumpolar states and six indigenous organizations.
- provide a means for promoting cooperation, coordination, and interaction among the Arctic
States.

Hong Kong
A British colony in China, received after the first Opium War and returned to China in 1997

• Enjoys a fair degree of autonomy

• Attractive to international businesses

– Deep, sheltered harbor

– Entry point to mainland China

– Highly educated, highly productive labor

– Banking and financial services

• Reexported

– Exports accounted for 161% of its 2017 G D P

Saudi Arabia
Largest economy in the Middle East; oil-rich

Multinational corporations
A firm that owns and controls value-adding activities in two or more countries

Economic growth policy

Spanish language
The national language spoken in Mexico today, because the early conquistadors required the natives to
learn the language once they took Mexico over.

Licensing
Transaction in which a firm (the licensor) sells the rights to use its intellectual property to another firm
(the licensee) for a fee.

European Union
- An international organization of European countries formed after World War II to reduce trade barriers
and increase cooperation among its members.

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 - An alliance that promotes trade among its member countries in Europe

- International organization comprised of Western European countries to promote free trade among
members.

Economic nationalism
an emphasis on domestic control and protection of the economy

Types of legal system

Civil law, common law, customary law, religious law, and mixed legal systems

Trade restrictions
Restrictions made by one country about the amounts and types of goods it will allow into the country
from other countries

Nationalization
Transfer of property from a privately owned firm to the government

Impact of international chain stores

Weakened local economies, eroded community character, and impoverished civic and cultural life.

Legal disputes and monetary awards

legal dispute - an argument or disagreement between two or more parties to be resolved by the legal
system

monetary award - An order from the court giving to one party a financial award in an absolute divorce
case.

Source of cultural changes

“Time is money” attitude

Attitudes about time differ dramatically across cultures. In Anglo-Saxon cultures, the prevailing
attitude is “time is money.” Time represents the opportunity to produce more and to raise one’s
income, so it is not to be wasted.
High-context culture
Culture in which the context in which a discussion is held is equally as important as the actual words that
are spoken in conveying the speaker's message to the listener

Ethics
An individual's beliefs about whether a decision, behavior, or action is right or wrong.

Code of ethics

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 written statements of the values and ethical standards that guide the firms' actions

Social responsibility
An organization's obligation to maximize its positive impact and minimize its negative impact on society

Contracts
agreement between two parties that creates an obligation

Free market economics

economic systems in which the market largely determines what goods and services get produced, who
gets them, and how the economy grows

BOP
Balance of payments (BOP) accounting system - Records commercial transactions between the residents
of one country and residents of other countries

Heckscher-Ohlin theory
Theory stating that a country will have a comparative advantage in producing goods that intensively use
factors of production it has in abundance

international product life cycle theory

theory stating that a company will begin by exporting its product and later undertake foreign direct
investment as the product moves through its life cycle

Types of economies
- free market, command, and mixed

Types of investment
stocks, bonds, mutual funds

Gold
Gold Standard - A monetary system in which paper money and coins are equal to the value of a certain
amount of gold.

Currency
Currency - A form of money used by a government and circulated within an economy, used as a medium
of exchange for goods and services. The basis for trade.

International monetary system

international Monetary System - Collection of agreements and institutions that govern exchange rates.

Currency exchange

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 system that converts from one currency to another so that goods can be bought and sold between
countries with different economies

Capital inflow and capital outflow

capital inflow - the net inflow of funds into a country

capital outflow - domestic purchases of foreign assets exceed foreign purchases of domestic assets

Forward rate and spot rate

Forwarded market - Market for foreign exchange involving delivery of currency at some point in time

spot market - Market for foreign exchange involving immediate delivery of the currency in question

Nontariff barrier
any governmental regulation, policy, or procedure other than a tariff that has the effect of impeding
international trade

Exchange rate
-The price of one nation's currency in terms of another nation's currency.

-Can be ether direct or indirect

Foreign-exchange market
Currencies issued by countries other than one's own

Cross rates
Exchange rate between two currencies, A and B, derived by using currency A to buy currency C and then
using currency C to buy currency B

Direct and indirect quote

Direct quote- (direct exchange rate) - Price of a foreign currency in terms of the home currency

Indirect quote -(I direct exchange rate) - Price of the home currency in terms of the foreign currency

Free trade
trade between nations that is unrestricted by governmental actions

Tariff
Tax placed on a good involved in international trade

Foreign trade zone

geographical area in which imported or exported goods receive preferential tariff treatment

Emerging markets
Countries whose recent growth or prospects for future growth exceed that of traditional market

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 FDI
Foreign Direct Investment - Investments made for the purpose of actively controlling property, assets, or
companies located in a host country.

Economic activity

High-income status
Irleand, Neway,

US Freedom of Information Act

The Freedom of Information Act (FOIA) is a federal law that generally provides that any
person has a right, enforceable in court, to obtain access to federal agency records.
Social mobility
Movement of individuals or groups from one position in a society's stratification system to another . The
ability of individuals to move from one stratum of society to another

Social status
- A measure of one's social standing obtained by combining factors such as education, income, and
occupation.

Common Agricultural Policy

A European Union policy based on the principle that a subsidy extended to farmers in any member
country should be extended to farmers in all member countries

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