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Glossary

539

government established to encourage the exports of U.S. businesses

export-led growth

involves

promoting economic growth through the export of manufactured goodstrade controls are either nonexistent or very low, in the sense that any disincentives to export resulting from

import barriers are counterbalanced by export subsidies export-oriented policy see export-led growth

move up in technological development by following in the pattern of countries ahead of them in the development process

forecasting exchange rates attempts to predict future rates of exchange

foreign direct investment acquisition of a controlling

foreign interest in

an overseas company or facility

foreign

repercussion effect

the

forward transaction

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

free trade

a system of open markets

between

countries

in which nations

concentrate

their production

on goods

they can make most cheaply,

with all

the consequent of labor

benefits

of the division

external balance

when a nation

realizes neither balance-of-payments

deficits nor balance-of-payments surpluses

external economies of scale

for a

firm relate to the size of an entire

industry within a particular geographic

area

impact that changes in domestic

expenditures

and income levels have

on foreign economies;

a rise in

domestic income stimulates

imports,

causing a foreign expansion that in turn raises demand for domestic exports

foreign-currency options

provide an

free trade area

an association of

trading

nations whose members

agree

to remove

all tariff

and nontariff bar-

riers

among themselves

free-on-board (FOB)

valuation when

a tariff is applied to a product s value

as it leaves the exporting country

F

factor-endowment theory

asserts

that a country exports those goods that

use its abundant factor more intensively

factor-price equalization

free trades

tendency to cause cheap factors of production to become more expensive, and the expensive factors of production

to become cheaper

options holder the right to buy or sell a fixed amount of foreign currency at a prearranged price, within a few days or

several years

foreign-exchange market the orga- nizational setting within which indivi- duals, businesses, governments, and banks buy and sell foreign currencies and other debt instruments

foreign-trade multiplier

when an

increase

in exports sets off a chain

reaction that results in greater levels of

free-trade argument

if each nation

produces what it does best and permits trade, over the long term each party will enjoy lower prices and higher levels

of output, income, and consumption than could be achieved in isolation

free-trade-biased sector

generally

comprises

exporting

companies,

their

workers, and their suppliers; it also consists of consumers, including wholesalers and retail merchants of imported goods

fast-track authority

devised in 1974,

this provision commits the U.S. Con- gress to consider trade agreements without amendment; in return, the president must adhere to a specified timetable and several other procedures

fiscal policy

refers to changes in

government spending and taxes

fixed exchange rates a system used primarily by small developing nations whose currencies are anchored to a key currency, such as the U.S. dollar

spending so that domestic income increases by some multiple of the

export increase foreign-trade zone (FTZ)

special

zones that enlarge the benefits of a bonded warehouse by eliminating the restrictive aspects of customs surveil- lance and by offering more suitable manufacturing facilities; FTZs are intended to stimulate international trade, attract industry, and create jobs by providing an area that gives users tariff and tax breaks

fundamental analysis the opposite of technical analysis; involves consider- ation of economic variables that are likely to affect a currencys value

fundamental disequilibrium the official exchange rate and

when the

market exchange rate may move apart,

reflecting changes in fundamental economic conditionsincome levels, tastes and preferences, and technological factors

futures market

a market in which

floating exchange rates

when a

nation allows its currency to fluctuate according to the free-market forces of

supply and demand

forward market

where foreign

exchange can be traded for future

delivery

forward rate

the rate of exchange

contracting

parties agree to future

exchanges

of currencies

and set appli-

cable exchange rates in advance; dis- tinguished from the forward market in that only a limited number of

flying-geese pattern of economic

growth

where

countries

gradually

used in the settlement of forward transactions

leading

currencies

are traded; trading

takes place in standardized

contract

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