Glossary Chapter 7 balance of payment (BoP) tracks both payments to and receipts from other nations. capital account records the sale and purchase of the country's assets. corruption the lack of integrity or honesty, or use of a position of trust for dishonest gain. corruption perception scores relate to the perceptions of the degree of corruption, ranging from 0 (highly clean) to 10 (highly corrupt). current account deficit exists when a country imports more goods and services than it exports. current account surplus exists when a nation exports more goods and services than it imports. current-account section a section of the BoP account that reflects credits and debits of all transactions involving the export (credit) and import (debit) of goods and services, income receipts from abroad, and income payments for foreign assets inside the country. developing countries countries whose per capita income are low by world standards but does not meet the UN criteria for least developed nation status in at least two of the three categories. FDI stock the accumulated total of all of a nation’s FDI. flow of FDI that amount of FDI flowing in and out of the country over a fixed period of time. foreign direct investment significant investment made by external individuals, firms and governments in local facilities to produce or market goods or services. foreign portfolio investment (FPI) investments undertaken by individuals, firms and governments that represent less than 10 percent equity interest in the target investment. free market view the view where nations must not interfere with FDI, but open up their country and permit the free flow of FDI. gross fixed capital formation the formation that consists of resident producers’ acquisitions, less disposals of fixed assets during a given period plus certain additions to the value of non-produced assets realised by the productive activity of producer or institutional units. location economies locations that offer the lowest cost factors of production. pragmatic nationalism view utilizes a cost benefit analysis to determine whether to accept FDI. radical view supporters of this view reject or nationalize developed countries’ FDI because they fear that FDI will spread Western liberalized democracy and imperialism that will suffocate and exploit lesser developed and underdeveloped nations that accept FDI. round tripping occurs when an investment is made abroad for tax reasons and ends up back in the home country. types of FDI mergers and joint ventures, acquisitions, and greenfields. undeveloped countries and least developed countries countries with no more that 10 percent of their GNP resulting from manufacturing. value chain viewing and identifying all of the functions, activities and process that contribute to the design, production, marketing, delivering and aftersales servicing of a good or a service. vertical integration the extension of a firm’s activities into adjacent stages of production.