International Trade and Money Chapter 7 Questions and Answers 2023

-Difference between outsourcing and offshoring - -Outsourcing: Outsourcing is a practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally. Source: Investopedia Foreign Outsourcing: - This is the same thing as offshoring Offshoring: - trade in intermediate inputs. - The provision of a service or the production of various parts of a good in different countries that are then used or assembled into a final good in another location -Why would a country offshore production/fragment of value chain to a foreign country? - -Essentially, a country would offshore because it's more economical. - Lower Labor cost - unskilled labor is cheaper - lower production costs - lower consumer prices -How have FDI changed the fragmentation of the GVC (Global Value Chain)? - -It has increased the fragmentation of the global value chain. When countries engage in foreign investment, they are typically looking intermediate goods that are cheaper to produce in foreign countries than at home.