FM-116 Chapter 3 Study Questions and Correct Answers
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Course
FM 116
Institution
FM 116
What is opportunity cost? The opportunity of giving up the second-best choice when making a decision
What is an absolute advantage? The benefit a country has in a given industry when it can produce more of a product than other nations using the same amount of resources
What is a comparative advan...
FM-116 Chapter 3 Study Questions and
Correct Answers
What is opportunity cost? ✅The opportunity of giving up the second-best choice when
making a decision
What is an absolute advantage? ✅The benefit a country has in a given industry when
it can produce more of a product than other nations using the same amount of
resources
What is a comparative advantage? ✅The benefit a country has in a given industry if it
can make products at a lower opportunity cost than other countries
What is balance of trade? ✅A basic measure of the difference in value between a
nation's exports and imports, including both goods and services
What is trade surplus? ✅exports > imports
What is a trade deficit? ✅exports < imports
What is balance of payments? ✅A measure of the total flow of money into or out of a
country
What is a balance of payment surplus? ✅money in a nation > out
What is a balance of payment deficit? ✅money in a nation < out
What is exchange rates? ✅A measurement of the value of one nation's currency
relative to the currency of other nations
What is a countertrade? ✅International trade that involves the barter of products for
products rather than for currency
What is foreign outsourcing? ✅Contracting with foreign suppliers to produce products,
usually at a fraction of the cost of domestic production
What is importing? ✅Buying products domestically that have been produced or grown
in foreign nations
What is exporting? ✅Selling products in foreign nations that have been produced or
grown domestically
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