Exit Exam
International Business - Terminology
Currency Hedging
Practice of insuring against potential losses that result from adverse changes in exchange
rates.
Embargo
Complete ban on trade (imports and exports) in one or more products with a particular
country.
Eurobond
Bond issued outside the country in whose currency it is denominated.
Eurocurrency Market
Market consisting of all the world’s currencies (referred to as “Eurocurrency”) that are
banked outside their countries of origin.
Exchange Rate
Rate at which one currency is exchanged for another.
Exchange Rate Risk (foreign exchange risk)
Risk of adverse changes in exchange rates.
Exports
Goods and services produced or based in one country that are sold abroad.
Fixed Exchange-Rate System
System in which the exchange rate for converting one currency into another is fixed by
international agreement.
Foreign Direct Investment
Purchase of physical assets or a significant amount of the ownership (stock) of a
company in another country to gain a measure of management control.
Foreign Exchange Market
Market in which currencies are bought and sold and their prices determined.
Franchising
Practice by which one company (the franchiser) supplies another (the franchisee) with
intangible property and other assistance over an extended period.
General Agreement on Tariffs and Trade (GATT)
Treaty designed to promote free trade by reducing both tariffs and nontariff barriers to
international trade.
Gold Standard
International monetary system in which nations linked the value of their paper currencies
to specific values of gold.
Gross Domestic Product (GDP)
Value of all goods and services produced by a country’s domestic economy over a oneyear period.
Gross National Product (GNP)
Value of all goods and services produced by a country during a one-year period,
including income generated by both domestic and international activities.
Imports
Goods and services brought into a country that are acquired from organizations located
abroad.
International Bond Market
Market consisting of all bonds sold by issuing companies, governments, or other
organizations outside their own countries.
International Monetary System
Collection of agreements and institutions that govern exchange rates.
Joint Venture
Separate company that is created and jointly owned by two or more independent entities
to achieve a common business objective.
Licensing
Practice by which one company owning intangible property (the licensor) grants another
firm (the licensee) the right to use that property for a specified period of time.
Managed Float System
Exchange-rate system in which currencies float against one another, with governments
intervening to stabilize their currencies at particular target exchange rates.
Multinational Company
Business that has direct investment abroad in multiple countries.
Quota
Restriction on the amount (measured in units or weight) of a good that can enter or leave
a country during a certain period of time.
Tariff
Government tax levied on a product as it enters or leaves a country.
Today’s Exchange Rate Arrangements
Today’s international monetary system remains in large part a managed float system,
whereby most nations’ currencies float against one another and governments engage in
limited intervention to realign exchange rates.
Turnkey (build-operate-transfer) Project
Practice by which one company designs, constructs, and tests a production facility for a
client firm.