The theory of comparative advantage states that a nation will produce those goods and services that it produces efficiently and effectively. It will buy goods and services from other nations that it cannot produce as efficiently and effectively as the other nation(s).

When the value of exports from a country exceeds the value of imports into that country, there is a _______________.

Favorable balance of trade means that the value of a nation’s exports exceeds the value of its imports. An unfavorable balance of trade occurs when the value of a nation’s exports is less than the value of its imports.

The difference between money coming into a country from exports and money leaving a country due to imports, plus money flows from other factors, is known as the:

The balance of payments is the difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flows coming into or leaving a country from other factors such as tourism, foreign aid, military expenditures and foreign investment.

In global trade, the term “dumping” refers to:

Dumping is the sale of products in a foreign country at lower prices than those charged in the producing country.

The nation of Andulasia exports $50 million worth of products and services and imports $44 million worth of products and services. Andulasia has a(n) _____________.

Trade surplus means that the value of a nation’s exports exceeds the value of its imports. A trade deficit occurs when the value of a nation’s exports is less than the value of its imports. In this example: Exports - Imports = trade surplus. $50 million - $44 million = $6 million trade surplus.

Even though the nation faces political instability, the island of Frollik with its wide, expansive beaches is a destination hub for cruise lines. Recently, a large theme park company showed strong interest in buying land in Frollik with the intent of building a park targeted toward families. The company wants to make a commitment to Frollik, including the hiring of several hundred local employees. They’re using a global marketing strategy called ____________.

Foreign direct investment refers to buying property and/or businesses in a foreign country, and making a commitment to produce and provide its product or service in that market. Foreign subsidiaries are a common form of foreign direct investment.

The strategic alliance between Coca-Cola and Nestlé has spanned a period of over 20 years due to the fact that both companies benefit from this arrangement. As a global marketing strategy, an important characteristic of a strategic alliance is _____________.

A strategic alliance is a long-term arrangement between two or more companies with the intent that each company will achieve a competitive market advantage. The companies do not share costs or profits.

Americans are often accused of ethnocentricity. This means that:

Ethnocentricity is the attitude that your own culture is superior to other cultures.

The makers of Whirlpool washers and other electrical appliance manufacturers need to be concerned about the kind and availability of electricity in the global marketplace. If there were a compatibility problem, it would be the result of a _____________difference.

Technological challenges include differences in electrical systems and the use of computers or the Internet.

The law that specifically prohibits “questionable” or “dubious” payments to foreign officials in an effort to secure business contracts is called the:

Enacted in 1978, the Foreign Corrupt Practices Act prohibits questionable or dubious payments to foreign officials.

According to Geert Hofstede, who has spent a lifetime studying differences in cultures, the Chinese have a long-term orientation, meaning they are patient savers and are willing to forgo things today, for a better future. Americans typically have a short-term orientation. They prefer more instant gratification and are not as willing to save for the future. This difference in values between the Chinese and Americans is a _____________ attribute that may represent a challenge in future global trade.

Sociocultural challenges include differences in religion, attitude, personal communication, manners and customs

Because of the high volume of bicycles as a common form of transportation in Beijing and Shanghai, Charles wants to sell his bicycle horns to these markets. In this case, the exchange rate is $1 U.S. dollar = 6.42 Chinese yuan. Economically speaking, how are his prospects?

Currency exchange rates continue to challenge global trade. In this scenario, it takes 6.42 yuan to = $1.00. Chinese customers would have to exchange 6.42 yuan for $1. They may prefer to buy a domestically made horn for less if this is considered too high.

During the past five years, the nation of Andolvia began a massive undertaking: teaching farmers how to successfully grow and harvest peanuts. The government subsidized the building of peanut processing plants, where private businesses are now producing peanut butter and other products of nutritional value. Although the Andolvia government has not completely banned the importation of peanuts, it has placed ________________ on the number of peanut products that the nation can import each year, in order to protect Andolvia’s young peanut industry.

Import quotas are protectionist policies structured to limit the number of products in certain categories that a government will permit to be imported into its nation

Using government regulations to limit the import of goods and services is called:

Trade protectionism is the use of government regulations to limit the import of goods and services.

The EU is an example of a trading bloc, or a______________, which has a common external tariff, no internal tariffs and the coordination of laws to facilitate trade between member countries.

The EU, Mercosur, ASEAN and COMESA are all common markets or trading blocs.

There are those who hope that ______ is a stepping-stone to the creation of a Free Trade Area of the Americas. This agreement today is between the United States, Canada, and Mexico.

ASEAN, Mercosur, and EU are all common markets. NAFTA is the agreement that created a free-trade area among the U.S., Canada and Mexico.

Recently, two nations experienced a trade dispute over copyright issues. Country “A” accused Country “B” of violating international copyright laws. Since both were members of ______________, they appealed to this organization to mediate the dispute.

The World Trade Organization (WTO) is a 153-member international organization whose purpose is to facilitate trade among member nations. The WTO listens to and mediates cross-border trade issues among its members. The WTO was established after the Uruguay Round of GATT (General Agreement on Tariffs and Trade).

______________ is the world’s largest exporter.

China is the world?s largest exporter.

Besides the shift of jobs to foreign countries, outsourcing has other drawbacks such as __________.

There is concern that many products produced abroad do not meet the safety standards required for selling in the U.S. The quality and precision of products are also questioned.

We refer to the BRIC nations as four global economic powers that will likely be important forces in world trade by 2030. It is predicted that the two nations that will supply the world with most of the world’s raw materials are ___________.

The BRIC nations are Brazil, Russia, India, and China. It is predicted that these nations will be the wealthier economies by 2030. The prediction is that Brazil and Russia will produce and sell most of the world’s raw materials, while India and China will be the leading global suppliers of manufactured goods.