Guide of Economics

It occurs when residents of one country acquire a controlling interest (stock ownership of
10 percent or more) in a business enterprise in another country?
A= Direct Investment

They are those nations of North America and Western Europe, plus Australia, New
Zealand, and Japan; and they are characterized by relatively high levels of gross domestic
product per capita, longer life expectancies, and higher levels of adult literacy?
A= Advanced nations

They are nations most of those in Africa, Asia, Latin America, and the Middle East, and they
are highly dependent on the advanced nations?
A= Developing nations

It is a record of the economic transactions between the residents of one country and the
rest of the world during a period?
A= The balance of payments

It is the difference in value between a country's imports and exports?

A= Balance of trade

It includes all of the goods the country exports or imports; agricultural products,
machinery, autos, petroleum, electronics, and the like?
A= Merchandise trade

It’s to balance or the exchange agreement between two nations promoting trade and
investment?
A= Bilateral trade

It is the emigration of highly educated and skilled people from developing nations to
industrial nations?
A= Brain drain.

It refers to the monetary value of international flows associated with transactions in goods
and services, investment income, and unilateral transfers?
A= The current account

It assumes that in a particular year your spending is greater than your income?
A= Current account deficit

It is a basic good used in commerce that is interchangeable with other ones of the same
type; it is most often used as inputs in the production of other goods or services?
A= Commodity

It is the international trade in primary goods, such goods are raw or partly refined
materials?
A= Commodity trade
It is a group of trading nations that permits (1) the free movement of goods and services
among member nations, (2) the initiation of common external trade restrictions against
nonmembers, and (3) the free movement of factors of production across national borders
within the economic bloc?
A= Common market

They are awarded to protect works of original authorship?

A= Copyrights

It refers to all international trade in which goods are exchanged for goods a kind of barter?
A= Countertrade

What are two types of International Transactions?

A= Credit and Debit.

It is an international transaction that result in a receipt of a payment from foreign?

A=Credit transaction

It is an international transaction that leads to a payment to foreign?

A= Debit Transaction

It is a market in which participants from around the world buy and sell on different
currencies?
A= Currency market

It is the conversion of one currency to another currency at one point in time, with an
agreement to reconvert it back to the original currency at a specified time in the future?
A= Currency swap

It is via international flows of goods and services, of people, and of investment such as
equipment, factories, stocks, and bonds?
A= Foreign Investment.

It refers to the organizational setting within which individuals, businesses, governments,

and banks buy and sell foreign currencies and other debt instruments?
A= Foreign-Exchange Market

It is an outright purchase and sale of foreign currency for cash settlement not more than
two business days after the date the transaction is recorded as a spot deal?
A= Spot Transaction

They are private-sector purchases of short and long term debt securities, such as treasury
bills, treasury notes, treasury bonds, etc?
A= Securities

It’s an outright purchase and sale of foreign currency at a fixed exchange rate but with
payment or delivery of the foreign currency at a future date?
A= Forward transaction

It is the price of one currency in terms of another?

A= The exchange rate
It means an excess of exports over imports of goods, services, investment income, and
unilateral transfers?
A= A current account surplus

It is an agreement among two or more trading partners to remove all tariff and non tariff
trade barriers among themselves; each member nation imposes identical trade
restrictions against nonparticipants?
A= Customs Union

Requirements that stipulate the minimum percentage of a product's total value that must
be produced domestically if the product is to qualify for zero tariff rates?
A= Domestic content requirements.

It is when foreign buyers are charged lower prices than domestic buyers for an identical
product, after allowing for transportation costs and tariff duties?
A= Dumping

It is a process of eliminating restrictions on international trade, payments, and factor

mobility?
A= Economic Integration

They are government-mandated limitations placed on customary trade or financial

relations among nations?
A= Economic sanctions

It’s the simultaneous purchase and sale of a currency in different foreign-exchange

markets in order to profit from exchange-rate differentials in the two locations?
A= Exchange arbitrage

It’s a subsidy paid to exporters so they can sell goods abroad at the lower world price but
still receive the higher support price?
A= Export subsidies

It refers to buy raw material?(material prima a granel)

A= Feedstock

It refers to changes in government spending and taxes?

A= Fiscal policy

It is a foreign acquisition of a controlling interest in an overseas company or facility?

A= Foreign direct investment

They are normally made by those who will receive or make payment in foreign exchange
in the weeks or months ahead?
A= Forward contracts

It’s a system of open markets between countries in which nations concentrate their
production on goods they can make most cheaply, with all the consequent benefits of the
division of labor?
A= Free trade

It is an association of trading nations whose members agree to remove all tariff and
nontariff barriers among themselves?
A= Free-trade area
It is a market in which contracting parties agree to future exchanges of currencies and set
applicable exchange rates in advance; distinguished from the forward market in that only
a limited number of leading currencies are traded; trading takes place in standardized
contract amounts and in a specific geographic location?
A= Futures market

Signed in 1947, agreement among contracting parties, the member nations, to decrease
trade barriers and to place all nations on an equal footing in trading relationships?
A= General Agreement on Tariffs and Rate (GATT)

It’s a technique permitting a specified number of goods to be imported each year, but does
not specify where the product is shipped from or who is permitted to import?
A= Global quota

It’s the process of avoiding or covering a foreign exchange risk?

A= Hedging

In the case of an MNE, it occurs when a parent company producing a commodity in the
source country sets up a subsidiary to produce the identical product in the host country?
A= Horizontal integration

It is support from the government for products that are imported

A= Import subsidy

Government policy that is actively involved in creating comparative advantage?

A= Industrial policy

The exclusive rights to use an invention, idea, product, or process for a given time awarded
to the inventor (or author) through registration with the government of that invention,
idea, product, or process?
A= Intellectual property rights (lPRs)

It’s an example of multinational enterprise in which a business organization established by

two or more companies combines their skills and assets?
A= International joint ventures

It is an asset or item that is purchased with the hope that it will generate income or
appreciate in the future?
A= Investment

It is an investing strategy that involves selecting global investment instruments as part of

an investment portfolio?
A= International investing

Here, industries are established largely to supply the domestic market, and foreign trade is
assigned negligible importance?
A= Inward-looking strategy or import substitution.

It’s an enterprise that cuts across national borders and is often directed from a company
planning center that is distant from the host country?
A= Multinational enterprise (MNE)

It’s a market-sharing pact negotiated by trading partners?

A= Orderly marketing agreement
It’s an agreement between a holder (buyer) and a wirter (seller) that gives the holder the
right, but not the obligation, to buy or sell financial instruments at any time through a
specified date?
A= Option.

It refers to encouraging the development of industries in which the country enjoys

comparative advantage, with heavy reliance on foreign nations as purchasers of the
increased production of exportable goods?
A= Outward-looking strategy

This happens when a producer consistently sells products abroad at lower prices than at
home?
A= Persistent dumping

This happens when a producer temporarily reduces the prices charged abroad to drive
foreign competitors out of business?
A= Predatory dumping

It is a government-imposed trade restriction limiting the number or value of goods a

country can import or export during a particular period?
A= Quota

It’s an import quota allocated to specific countries?

A= Selective quota

Secure to an inventor for a term, usually 15 years or more, the exclusive right to make, use,
or sell the invention?
A= Patents

The attempt to profit by trading on expectations about prices in the future?

A= Speculation

This happens when a firm disposes of excess inventories on foreign markets by selling
abroad at lower prices than at home?
A= Sporadic dumping

They are granted by governments to domestic producers to improve their trade

competitiveness; include outright cash disbursements, tax concessions, insurance
arrangements, and loans at below-market interest rates?
A= Subsidies

It is the one under which U.S average tariffs were raised to 53% on protected imports?
A= Smooth-Hawley Tariff Act (SHTA) 1930.

It’s a tax levied on a product when it crosses national boundaries?

A= Tariff

It’s a welfare loss resulting from the formation of a regional trade bloc; it occurs when
imports from a low-cost supplier outside the trade bloc are replaced by purchases from a
higher-cost supplier within the trade bloc?
A= Trade-diversion effect
It is a technique where an MNE reports most of its profits in a low-tax country, even
though the profits are earned in a high-tax country?
A= Transfer pricing

It is the process of knowledge and skills applied to how goods are produced?
A= Technology transfer

They are awarded to manufacturers and provide exclusive rights to a distinguishing name
or symbol?
A= Trademarks

In the case of an MNE, it occurs when the parent MNE decides to establish foreign
subsidiaries to produce intermediate goods or inputs that go into the production of the
finished good?
A= Vertical integration

It embodies the main provisions of GATT, but its role was expanded to include a
mechanism intended to improve GATT’s process for resolving trade disputes among
member nations?
A= World Trade Organizations (WTO).

National economies making transition from a centrally planned economy to a market

economy?
A= Transition Nations

A trading accord that calls for a reduction of imports of a specific commodity. The
agreement is intended to protect domestic supply of the commodity.
A= Orderly Marketing Agreement

Price of goods traded on a spot market and available for almost immediate delivery. Also
called cash price.
A= Spot Price

A share of a company held by an individual or group. Stocks are bought and sold on what
is called an exchange.
A= Stock

A current account surplus is a positive current account balance, indicating that a nation is
a net lender to the rest of the world.
A= Current account surplus

Deduction, exclusion, or exemption from a tax liability, offered as an enticement to engage

in a specified activity (such as investment in capital goods) for a certain period.
A= Tax incentive

Laws related to the exchange of goods or services involved in international trade including
taxes, subsidies, and import/export regulations
A= Trade Policy

A company's book that shows and accounts for the stock market shares that are purchased
and sold by the entity.
A= Trading Book