6564608
Description
Flashcards by Kyle Olson, updated more than 1 year ago
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Created by Kyle Olson
about 8 years ago
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| Question | Answer |
| Balance of Payments (BOP) | Summary of transaction between domestic and foreign residents for a country over a specific time |
| Components of BOP statement | -Current Account -Capital Account -Financial Account |
| Current Account | -Payments for merchandise and services -Factor income payments (received on foreign investments in securities) -Transfer payments (aid, grants, gifts) |
| Balance of Trade | Difference between total exports and total imports |
| Capital Account | -Originally included in financial account -Includes value of financial assets transferred across country borders by people moving to another country -Includes patents and trademarks -Relatively minor to the financial account |
| Financial Account | -DFI -Portfolio investment (long-term assets) -Other capital investments (short-term assets) -Errors and omissions and reserves (catch-all) |
| Events that increased trade volume | Berlin wall coming down, Single European Act, NAFTA, GATT, inception of the Euro, expansion of the EU |
| Outsourcing | Subcontracting to a third party in another country to provide goods and services that were previously provided domestically |
| Impacts of outsourcing | Pros: Increased international trade, lower cost of operations, new job creation in other countries Cons: May reduce jobs in the United States |
| Managerial decisions about outsourcing | Potential savings, job creation, shareholders thoughts, possible bad publicity and low morale |
| Cost of labor | countries with low labor cost have advantage |
| Inflation | current account decreases if inflation increases relative to trade partners |
| National income | current account decreases if national income increases relative to trade partners |
| Credit conditions | tighten when economic conditions weaken (banks less likely to loan to MNC) |
| Restrictions on imports | Taxes (tariffs) on imports increase prices and limit consumption Quotas limit the volume of imports |
| Subsidies for exporters | Government subsidies help firms produce at lower cost than global competitors |
| Restrictions on piracy | Government can affect trade flows by its lack of restrictions on piracy |
| Environmental restrictions | can lead to higher production costs |
| Labor law | countries with more restrictive laws incur higher labor costs |
| Business laws | Firms in countries with more restrictive bribery laws may not be able to compete globally in some situations |
| Tax breaks | A form of government financial support that might benefit firms that export products |
| Country trade requirements | Requiring various forms or licenses before countries can export to another country (bureaucracy) |
| Government ownership of subsidies | Some governments maintain ownership in firms that are major exporters |
| Country security laws | Governments may impose certain restrictions when national security is a concern |
| Objective of the International Monetary Fund (IMF) | Promote cooperation, exchange rate stability, provide temporary funds, promote free trade |
| World Bank | International Bank for Reconstruction and Development |
| Objective of World Bank | make loans to countries to enhance economic development |
| World Trade Organization (WTO) | Provide trade regulations and settle disputes related to GATT |
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