1. An exchange rate of €1 = $1.30 indicates that:
A. one euro buys 1/1.3 dollars
B. one could get 1.30 euros for $1.
C. one euro buys 1.30 dollars.
D. $1 is worth 1.30 euros.
1. Which of the following is a disadvantage of global capital market?
A. Foreign investments may be driven by speculative flows in the market.
B. A truly global market reduces the liquidity of investments.
C. The availability of capital is low in a global capital market.
D. The cost of capital is more in a global market than a domestic market.
1. Eurodollars .
A. are used to pay for imports from Europe
B. are dollars banked outside of the United States
C. refer to the exchange buffer that Euro has against dollar
D. refer to the exchange value of dollar with Euro
1. In 1997, two South Korean manufacturers of semiconductors, LG Semicon and Hyundai Electronics, were accused of selling dynamic random access memory chips (DRAMs) in the U.S. market at below their costs of production. It was alleged that the firms were trying to unload their excess production in the United States. This is an example of:
B. ad valorem tariff
C. import quota
1. Under a _____ exchange rate regime, a country will attach the value of its currency to that of a major currency.
A. free float
B. currency board
D. managed float
1. Which term refers to the rate at which one currency is converted into another?
A. Exchange rate
B. Interchange rate
C. Basic point
1. Which of the following selections accurately depicts the levels of economic integration from least integrated to most integrated?
A. Common market, economic union, full political union, free trade area and customs union
B. Full political union, free trade area, common market, customs union and economic union
C. Free trade area, customs union, common market, economic union and full political union
D. Free trade area, common market, economic union, customs union, and full political union
1. Research and Development division of a company has recently designed a new coffee vending machine that is likely to sell very well in the market. It is compact, user-friendly, and provides unprecedented efficiency in terms of cost per cup. Consequently, the company fears that its competitors would soon mimic the design of their product and to protect its product, it is now seeking a for the same.
1. Sony was a pioneer in the portable music market segment. Sony’s Walkman was an innovative product which created a new category altogether and made Sony a technological leader. This gave the company an edge over other consumer electronics brands that introduced portable music players for a very long time. In this example, Sony had the _______
A. vertical integration advantage.
B. purchasing power parity advantage.
C. first-mover advantage.
D. free-rider advantage.
1. Identify the INCORRECT statement about trade barriers.
A. They raise the costs of exporting products to a country.
B. They may put a firm at a competitive advantage to indigenous competitors.
C. To conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise.
D. They may limit a firm’s ability to serve a country from locations outside of that country.
1. Which of the following is NOT true regarding culture?
A. Culture is a system of values and norms that are shared among a group of people.
B. Culture is static (it doesn’t evolve over time)
C. Culture varies across and within nations
D. Culture involves the knowledge and beliefs of people.
1. Which of the following is a consequence of subsidies?
A. Subsidies protect inefficient domestic producers.
B. Subsidies are only towards the state-owned businesses.
C. Subsidies make domestic producers vulnerable to foreign competition
D. Subsidies produce revenue for the government.
1. Which of the following is NOT a consequence of globalization?
A. Increasing flow of information and products
B. Increasing interdependence between national economies
C. Increasing outsourcing of services
D. Separation between national markets
1. Suppose the price of a Big Mac in New York is $3.00 and the price of a Big Mac in Paris is equivalent to $3.75 at the prevailing euro/dollar exchange rate. Using the concept of purchasing power parity, the euro is:
A. undervalued by 25 percent [(3.75-3)/3] against the dollar
B. overvalued by 25 percent [(3.75-3)/3] against the dollar
C. equal to the dollar
D. None of above
1. A market economy encourages innovation because _____.
A. the prices of goods and services, including new products, are fixed by government
B. economic freedom leads to greater incentives for innovation.
C. state ownership of enterprises reduces risks of innovation.
D. government-owned and funded research centers become hubs of innovation.
1. Identify the INCORRECT statement pertaining to Raymond Vernon’s product life-cycle (PLC) theory.
A. As a new product becomes widely accepted internationally production starts in other countries
B. Early in their life cycle, most new products are produced in and exported from the country in which they were developed
C. A product may ultimately be exported back to the country of its original innovation
D. A product in the early stage of the life cycle is imported by the country where it was innovated
1. Which of the following is a financial risk associated with globalization?
A. Differentiation of markets
B. Restrictions on competition
C. Excessive market regulation
D. Global financial contagion
1. Which of the following statements about the legal systems of countries is NOT true?
A. They are influenced by the prevailing political system of the country
B. They are almost the same for all countries
C. They are of immense importance to international business
D. They can affect the attractiveness of a country as an investment site or market.
1. Which of the following arguments strengthen the idea of floating exchange rates?
A. Trade deficits can be corrected through changes in exchange rates.
B. Changes in exchange rates will not impact the trade balance in a country.
C. External agencies should not interfere in the monetary policies of a country.
D. Governments should act in ways to minimize the uncertainty in monetary markets.
1. Which of the following is an example of a greenfield investment?
A. A Serbian automobile company purchasing a Croatian component manufacturer
B. A Finnish mobile phone manufacturer expanding its production facility in Finland
C. An Indian oil exploration company acquiring an oil refining company
D. A Chinese sugar maker setting up a sugar crushing facilityin Cuba
1. _____ occurs when a firm exports goods or services to consumers in another country
A. Foreign direct investment
C. International trade
D. Inward investment
1. Which of the following occurs when the quantity of money in circulation (money supply) in a country rises faster than the country’s stock of goods and services?
A. Credit squeeze
D. Production surplus
1. The _____ suggests that given relatively efficient markets, the price of a “basket of goods” should be roughly equivalent in each country.
A. theory of price inflation
B. theory of competitive advantage
C. random walk theory
D. purchasing power parity (PPP) theory
1. Country A can produce product X, but it can also buy it at a cheap rate from Country B. Which of the following courses of action is suitable in this situation according to Adam Smith’s theory of absolute advantage?
A. Country A should import product X from country B and it should not attempt to produce it at home.
B. Country A should subsidize the production of product X to obtain an absolute advantage over country B.
C. Country A should produce more of product X and should attempt to obtain an absolute advantage for the product.
D. Country A should partly import the product and produce it domestically.
1. In a pure free market economy:
A. collectivist goals are given priority over individual goals.
B. production is determined by the interaction of supply and demand
C. the prices at which goods are sold is determined by the government.
D. all productive activities are owned by the state
1. The social organization of Western society tends to emphasize on:
A. a group orientation.
B. work groups.
C. individual achievement.
D. collectivist values.
1. Peoples’ right to protest on issues of accountability in public expenditure would be possible in a _____ political set-up.
1. What was the main objection raised by those in the United States and Canada who opposed the ratification of the NAFTA?
A. Job losses
B. Balance of payment problems
C. Threat of competition from Asian companies
D. Threat of a loss of national sovereignty
1. Which of the following is an example of ethnocentrism?
A. An upper-middle-class woman talks rudely to a sales person, because she looks down upon individuals belonging to the working-class.
B. A manager in India looks down upon his subordinates because they are from a lower caste, compared to him.
C. An American manager criticizes the cultural practices of Saudi Arabia, when he is sent there on business, because it differs from his own cultural norms.
D. A French business owner, who plans to expand his market to China, conducts a detailed cultural study of China to customize his marketing campaign.
1. A multinational enterprise (MNE) is a firm that .
A. exports its products to multiple countries
B. has production units in more than two countries
C. does most of its business on the Internet
D. lists its securities on a public exchange
1. Which of the following is the main principle of mercantilism?
A. It is in a country’s best interests to maintain a trade surplus
B. Countries should encourage absolute free trade
C. Protection of domestic industries is not essential for a nation’s welfare.
D. Government intervention is not required in global trade
1. A pair of shoes costs £40 in Britain. An identical pair costs $50 in the United States when the exchange rate is £1 = $1.50. Which of the following is correct?
A. The U.S. offers a better deal.
B. A trader can make money by buying the shoes in Britain and selling it in the U.S. at $50.
C. Britain offers a better deal.
D. The deal is the same in both countries.
1. A(n) involves delaying collection of foreign currency receivables if that currency is expected to appreciate and delaying payables if the currency is expected to depreciate.
A. Lag strategy
B. Follower strategy
C. Lead strategy
D. Interim strategy
1. Which of the following statements about individualism is NOT true?
A. Individualism promotes free market economics.
B. Individualism creates an anti-business environment.
C. Individualism advocates for a democratic political system.
D. Individualism promotes private entrepreneurship.
1. If the demand for dollars outstrips its supply and if the supply of Japanese yen is greater than the demand for it, what will happen?
A. The dollar will depreciate against the yen
B. The exchange rates will remain the same
C. The dollar will appreciate against the yen
D. The yen will appreciate against the dollar
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