INTBUS final

Which of the following is a solution to the issue of how to make a coordinating bureaucracy accountable to the citizens of member nations?

Establishment of a political union

The _____ is responsible for proposing European Union legislation, implementing it, and monitoring compliance with European Union laws by member states

European commission

The ____ refers to a system to regulate fixed exchange rates before the introduction of the euro

European monetary system

The _____, which has 754 members as of 2012, is directly elected by the populations of the member-states

European parliament

Which of the following is true with regard to establishment of the euro?

It was designed to eliminate currency as a barrier to trade in the EU

If a country's government does not control the rate of growth in money supply:

Its currency could depreciate in the future

Which of the following involves granting a foreign entity the right to produce and sell the firm's product in return for a royalty fee on every unit sold?

Licensing

A(n) _____ requires that some specific fraction of a good must be produced domestically.

Local content requirement

The viability of an exporting strategy is often constrained by transportation costs, particularly of products that have a _____ and that can be produced in almost any location

Low value-to weight ratio

The frequency of government intervention in the foreign exchange market explains why the current system is sometimes thought of as a(n) _____.

Managed-float system

_____ refers to the pact among Argentina, Brazil, Paraguay, and Uruguay that originated in 1988 to establish a free trade area

Mercosur

Concerns about _____ arise because close economic integration demands that countries give up some degree of their control over such key policy issues as monetary policy, fiscal policy, and trade policy.

National sovereignty

Which of the following statements regarding the free market view is true?

No country has adopted the free market view in pure form

According to Krugman, which of the following best indicates the dangers of a strategic trade policy?

Occurrence of a trade war

To encourage inward FDI, it is increasingly common for governments to:

Offer incentives to foreign firms to invest in their countries

Host governments use a range of controls to restrict inward FDI. The two most common are:

Ownership restrains and performance requirements

It has been shown that adopting a _____ exchange rate regime moderates inflationary pressures in a country

Pegged

A _____ means the value of the currency is fixed relative to a reference currency, and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate.

Pegged exchange rate

In which of the following situations can an international business command higher prices for a particular product in a foreign market?

When the product offers greater value to customers in the foreign market

A firm is most likely to favor foreign direct investment over exporting when:

When transportation costs or trade barriers make exporting unattractive

Jupiter Systems is a high-tech firm looking to set up operations in a foreign country to profit from its technological know-how which is its core competency. Which of the following modes of entry would be most favorable to the firm if it wants to keep a tight control over its technology?

Wholly owned subsidiary

Which of the following is a disadvantage of franchising as a mode of entry into foreign markets?

Poor quality standards of a foreign franchise can cause a decline in the franchising firm's worldwide reputation

The main benefits of inward FDI for a host country arise from

Resource-transfer effects, employment effects, balance-of-payments effects and effects on competition an economic growth

A country Cadmia, which is a leading producer of bauxite, had to impose trade sanctions on Cerian soda cans in order to get the government of Ceria to enforce export restrains. This imposition by Cadmian government was undertaken to protect domestic producers of soda cans. Which of the following government intervention is being used by Cadmia?

Retaliation

Which of the following is a major type of foreign investment risk that is insurable through government-backed programs?

Risks of expropriation

The United States has been an attractive target for FDI partly because of its

Stable and dynamic economy

_____, a category of foreign exchange risk, refers to the extent to which the reported consolidated results and balance sheets of a corporation are affected by fluctuations in foreign exchange values

translation exposure

When is the phenomenon of capital flight most likely to occur?

when the value of the domestic currency is depreciating rapidly because of hyperinflation or when a country's economic prospects are shaky in other respects

The International Monetary Fund been criticized for:

• Having a one size fits all approach to macroeconomic policy • Exacerbating moral hazard

Which of the following was the weakness of the Bretton Woods system?

• The IMF had no way to force surplus countries to either revalue their exchange rates upwards or pursue more expansionary policies. • The reserve-currency country, the United States, could not devalue its currency even if the dollar was overvalued

The WTO's Agreement on _____ is an attempt to narrow the gaps in the way intellectual property rights are protected around the world and to bring them under common international rules

• Trade-related aspects of intellectual property rights (TRIPS)

Which of the following statements is most likely to be true regarding the effects of FDI on employment?

A beneficial employment effect claimed for FDI is that it brings jobs to a host country that would otherwise not be created there.

Why is retaliation by government intervention a risky strategy?

A country that is being pressured may respond to the imposition of punitive tariffs by raising trade barriers of its own.

Which of the following countries presents a favorable benefit-cost-risk trade-off scenario for foreign expansion?

A country with a free market system

Which of the following industries tends to be one of the largest beneficiaries of subsidies in most countries?

Agriculture

Many host countries are concerned that a foreign-owned manufacturing plant may import many components from its home country, which has negative implications for the host country's _____.

Balance of payments

_____ accounts are national accounts that track both payments to and receipts from other countries.

Balance of payments accounts

Which of the following observations about the International Development Association (IDA) scheme of the World Bank is true?

Borrowers have up to 50 years to repay at an interest rate of less than 1 percent a year

_____ are the highest rate that can be charged, which is often, but not always, the rate that is charged

Bound tariff rates

The two US agencies that deal with antidumping complaints are

Commerce department and the international trade commission

tariffs cause damage to _____ as they must pay more for certain imports

Consumers

_____ refers to the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates

Currency swap

The nominal interest rate is 9 percent in Brazil and 6 percent in Japan. Applying the international Fisher effect, the Brazilian real should:

Depreciate by 3 percent against the Japanese yen

FDI is risky because of the problems associated with:

Doing business in a different culture where the rules of the game may be very different

If Argonia exports vast quantities of cheap toys to Cadmia, selling them at below their costs of production, it would constitute

Dumping

The _____ states that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI and it also requires the firm to establish production facilities where those foreign assets or resource endowments are located

Eclectic paradigm

As an incentive to encourage domestic firms to undertake FDI, many countries have:

Eliminated double taxation of foreign income

A firm that does not want to bear the costs of establishing production facilities in a foreign country should avoid

FDI

_____ are the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements

Free trade agreements

A(n) _____ is defined as a group of countries committed to removing all barriers to the free flow of goods and services between each other, but pursuing independent external trade policies

Free trade area

In terms of the approaches to exchange rate forecasting, _____ draw(s) on economic theory to construct sophisticated econometric models for predicting exchange rate movements

Fundamental analysis

Which term was not defined in the International Monetary Fund's Articles of Agreement but was intended to apply to countries that had suffered permanent adverse shifts in the demand for their products?

Fundamental disequilibrium

According to economic theory, interest rates reflect expectations about likely _____.

Future inflation rates

An advantage of a(n) _____, a mode of entry into foreign markets, is that it provides a firm with much greater ability to build the kind of subsidiary company that it wants.

Greenfield venture

According to Krugman, the ideal way for a country to respond, when the foreign competitors of its companies are already being supported by government subsidies, is a probably not to engage in retaliatory action, but to:

Help establish rules that minimize the use of trade-distorting subsidies

Which of the following is a disadvantage of wholly owned subsidiaries as a mode of entry into foreign markets?

High costs and risks

According to the radical view of FDI, multinational enterprises (MNEs) that already exist in a country

Immediately nationalized

According to the radical view of FDI, multinational enterprises (MNEs) that already exist in a country:

Immediately nationalized

According to _____, many developing countries have a potential comparative advantage in manufacturing, but new manufacturing industries cannot initially compete with well-established industries in developed countries

Infant industry argument

Which of the following is a variable used in exchange rate forecasting models based on fundamental analysis?

Inflation rate

Which of the following is true of monetary contraction in a fixed exchange rate system?

It leads to an inflow of money from abroad

Which of the following are significant trade blocs in Europe?

The European Union and the European Free Trade Association

According to the free market view, how does FDI increase the efficiency of world economy through MNEs?

The MNE is an instrument for dispersing the production of goods and services to the most efficient locations around the globe

Which of the following is an example of a first-mover advantage?

The ability to create switching costs that tie customers into ones products or services

Which of the following is a benefit of adopting the euro?

The adoption of a common currency makes it easier to compare prices across Europe

A regional free trade agreement will benefit the world only if

The amount of trade it creates exceeds the amount it diverts

Which of the following is true of the basic entry decisions a firm must make before a firm contemplates foreign expansion?

The attractiveness of a country as a potential market for a international business depends on balancing the benefits, costs, and risks associated with doing business in that country

The most important concerns regarding the costs of FDI for the home-country center on:

The balance-of-payments and employment effects of outward FDI

The system of adjustable parities allowed for the devaluation of a country's currency by more than 10 percent if the International Monetary Fund (IMF) agreed that a:

The country's balance of payments is in "fundamental disequilibrium"

The Maastricht Treaty called for:

The creation of an economic and monetary union (EMU) in Europe

Which of the following was an announcement made by U.S. President Nixon to enable the devaluation of the dollar during the increase in inflation in 1971 in the United States?

The dollar would no longer be convertible into gold

Which of the following statements with regard to subsidies is true?

The main gains from subsidies accrue to domestic producers, whose international competitiveness is increased as a result

Which of the following is true of the Andean Pact during the mid-1980s?

The pact had failed to achieve the objective of a common external tariff

Which of the following is a reason why firms often overpay for the assets of an acquired firm?

The price of the target firm can get bid up if more than one firm is interested in its purchase

Under a fixed exchange rate regime, what would be the result if a country rapidly increased its money supply by printing currency?

The prices of imports would become more attractive in the country

Which of the following is a loopholes in antidumping laws that is being exploited by many countries to pursue protectionism?

The rather vague definition of what constitutes "dumping"

Which of the following refers to currency speculation?

The short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates

The stock of foreign direct investment refers to:

The totally accumulated value of foreign-owned assets at a given time

Which of the following is a reason why governments limit convertibility of their currency?

To preserve their foreign exchange reserves

_____ occurs when lower-cost external suppliers are replaced by higher-cost suppliers within a free trade area

Trade diversion

Which of the following is a vehicle currency due to its central role in foreign exchange deals?

U.S. dollar

During 1998 to 2010, which of the following countries had the highest FDI outflow?

United States

_____ is one of the ways in which countries can circumvent GATT regulations and is best exemplified by the agreement between Japan and America under which Japanese producers promised to limit their auto imports into the United States

Voluntary export restraint

A(n) _____ is a quota on trade imposed by the exporting country, typically at the request of the importing country's government

Voluntary export restraints

Since the early 1970s, developed countries such as Great Britain and the United States have financed their trade deficits by:

borrowing private money

Antidumping duties are often called _____ duties

countervailing

_____ refers to a system under which a country's currency is nominally allowed to float freely against other currencies, but in which the government will intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value.

dirty float

3M, an American firm, manufactures adhesive tapes in St. Paul, Minnesota, and ships the tapes to South Korea for sale. According to this information, which of the following is being done by 3M?

exporting

The _____ of foreign direct investment refers to the amount of FDI undertaken over a given period (normally a year).

flow

Which of the following modes of entry is suitable for service firms where the risk of losing control over the management skills or technological know-how is not much of a concern, and where the firms' valuable asset is their brand name?

franchising

The _____ view argues that international production should be distributed among countries according to the theory of comparative advantage.

free market

In terms of licensing, which of the following is an intangible property?

patent

An advantage of a pegged exchange rate system is that it imposes monetary discipline on a country and leads to low _____.

price inflation

All International Monetary Fund (IMF) loan packages come with conditions attached. Which of the following is prevented due to these policies of the IMF?

speculation

Which of the following is a trade policy instrument that the GATT and WTO have been most successful in limiting?

tariffs

Which of the following is true regarding the difference between GATT and WTO?

the WTO was encouraged to extend its reach to encompass regulations governing foreign direct investment unlike GATT

Mergers and acquisitions differ from greenfield investments in that:

the percentage of mergers and acquisitions is lower than greenfield investments in developing nations