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AFM131 (200)
Chapter 1-5

AFM131 Chapter Notes - Chapter 1-5: International Monetary Fund, Absolute Advantage, Complex Differential Form


Department
Accounting & Financial Management
Course Code
AFM131
Professor
Kostadinka Bizheva
Chapter
1-5

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Free trade: movement of goods and services without political or
economic barriers..
Comparative advantage theory: Country should sell to other countries
the products that it produces most eectively and eciently and
should buy from other countries what it cannot produce eciently and
eectively.
Absolute advantage: when a country is able to produce something
more eciently than all other countries.
Balance of trade can either have trade surplus OR trade de"cit
Trade surplus: exports exceed imports
Trade de"cit: imports exceed exports
Balance of trade = balance of payments
Licensing: a "rm (licensor) allows foreign company (licensee) to
produce product in exchange for royalty.
Foreign direct investment: buying permanent property and in foreign
countries
Foreign subsidy: Company owned in a foreign country by the parent
company
Devaluation: lowering a nations currency relative to other currencies
Calendar trading: complex form of bartering, each party trading goods
for goods or services for services.
Trade protectionism: use of government regulations to limit imports of
goods and services
Dumping: selling products and foreign country at lower prices then
charged in producing Country
Embargo: complete been on import or export of certain product,
stopping trade with a country
International monetary fund: International bank making short-term
loans to assist countries to balance their trade.
World Bank: Rich country loan to poor countries

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Common market (trading bloc): Group of countries with common
external Tari, no international Tari, laws to facility exchange
Government activities six categories aecting business:
Crown corporations
Companies owned by Federal or provincial government
Laws and regulations
Taxation and Financial policies
Tax collected by government and "ne-tuned to give eect to certain
policies ="scal policy
(Fiscal policy= Federal government eort to keep the economy stable
by increasing or decreasing taxes for government spending)
Government expenditures
Direct and indirect aid packages provided by the government as
incentives to achieve certain goals
Purchasing policies
Federal government is single largest purchaser in Canada, policies
regarding where to purchase aect many businesses.
Services
Direct and indirect activities:
helping companies go international,
bringing companies to Canada
training and retraining workforce
National policy: Government directive placing high taris on imports
from the United States to protect Canadian manufacturing, which has
higher costs
Privatization: Government selling crown corporations
Deregulation: Government withdrawal of laws and regulations to
stimulate competition
Federal government responsibilities:
Trade regulations
Incorporation of federal companies
Taxation
Banking and monetary system
Hospital insurance and Medicare
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Public debt and property
National defense
Unemployment
Immigration
Criminal law
Fisheries
Provincial governments responsibilities:
Regulation of provincial trading commerce
Natural resources
Incorporation of provincial companies
Direct taxation for provincial purposes
Licensing for revenue purposes
Administration of justice
Health and social services
Municipal aairs
Property law
Labor law
Education
Monetary policy: management of money supply and interest rates
Government expenditures:
Financial aid
Equalization program
Transfer payments: Direct payments from government to other
governments or to individuals
Equalization: Government program to reduce "scal disparities
among provinces
("scal: relating to government revenue, taxes.)
Government services:
Industry Canada
National research Council
Foreign aairs and international trade
Micro Enterprises: small businesses w/ less than "ve employees
Aliate market: Internet based marketing wear business rewards
individuals or other businesses for each visitor customer the aliate
sends to the website
Intrapreneurs: entrepreneurs within corporations
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