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Multinational Business Final

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Ryan, a foreign-exchange dealer, sold U.S. dollars for Swiss francs in the United States, then sold Swiss francs for Japanese yen in Switzerland, and then sold the Japanese yen for U.S. dollars in the United States. Ryan hopes that he will end up with more U.S. dollars than when he began. Which term best describes Ryan's actions? A) arbitrage B) speculation C) spot transaction D) outright forward

Shelly, a manager at a global firm, is studying the foreign currency intervention practices of Indonesia. Shelly is most likely examining ________ factors. A) institutional setting B) fundamental analysis C) confidence D) circumstantial

Ted, a manager at Global Manufacturing, is analyzing trends in economic variables to predict future exchange rates that might affect the MNE's international operations. Which of the following is Ted most likely doing? A) fundamental forecasting B) technical forecasting C) resource forecasting D) economic forecasting

The ________ clause embodied the fundamental principle of GATT—trade without discrimination. A) most-favored-nation B) nontariff barriers C) free rider D) normal trade relations

The basis for designing an effective export strategy most likely begins with ________. A) identifying and developing the firm's core competencies B) hiring local personnel in target markets to build the business C) enlisting the support of an export management company D) simultaneously targeting a large number of foreign markets

The benefits of retaining a core competency within a company and purposefully threading that core competency through the value chain are referred to as ________ advantages. A) internalization B) domestic C) location D) ownership

________ involve the exchange of currency the second day after the date on which the two foreign-exchange traders agree to the transaction. A) Spot transactions B) Outright forward transactions C) FX swaps D) Reverse transactions

Brooke buys shares of stock in a small bakery in a foreign country in return for an ownership position and promised capital gains. This is an example of ________. A) equity securities B) debt financing C) playing the stock market D) investing in Euroequities

Commodity agreements ________. A) were initially established to attempt to stabilize commodity prices B) are effective in regulating the price of grains but not minerals C) are effective in regulating the prices of both grains and minerals D) were disbanded by the United Nations for being non-competitive

Each ADR represents ________ of the shares of the underlying foreign stock. A) some number B) 100 C) 1 D) ADRs have nothing to do with foreign stocks.

Export restrictions have a tendency to ________. A) favor domestic consumers B) protect employment in the export-restricted industries C) lower prices in foreign markets D) encourage the development of substitutes in the restricting country

If a foreign currency is quoted in American terms (the direct quote) and the forward rate is greater than the spot rate, the foreign currency is selling at a ________. A) forward premium B) forward discount C) backward discount D) discounted premium

In addition to protection, tariffs serve to ________. A) generate revenue B) subsidize exports C) subsidize imports D) increase consumption

Of the following possibilities, the European Union is best described as a ________. A) customs union B) domestic organization C) global bargaining unit D) common language agreement

According to purchasing power parity, if the domestic inflation rate is ________ than that in the foreign country, the domestic currency should be ________ than that of the foreign country. A) lower; weaker B) higher; higher C) lower; stronger D) higher; stronger

According to the research described in your text, which of the following is among the factors that would increase a firm's probability of exporting? A) low domestic productivity B) high domestic labor costs C) high level of efficiency D) high R & D demands

Acquiring and allocating financial resources among the company's activities and projects is the responsibility of the ________. A) accounting function of the firm B) external auditors C) CFO D) financial marketing manager

Which of the following recently threatened the future of the EU's common currency? A) refusal of the UK to use the euro B) failed mergers and acquisitions C) debt crisis in Greece D) human rights issues

According to U.S. tax law, if a foreign subsidiary earns income, ________. A) its income is immediately taxable to the parent, irrespective of the type of income earned B) that income is not taxable to the parent company as long as the subsidiary pays income taxes in the country where it is earned C) passive income is taxable to the parent unless the parent company is a controlled foreign corporation D) active income is taxable to the parent when it is remitted as a dividend

All of the following are ways to control currency convertibility EXCEPT ________. A) import licenses B) multiple exchange rates C) import deposits D) purchasing power parity

An Australian company makes athletic wear for women, men, and children. After several years of successfully exporting its products to the U.K. and the U.S., the company began exporting to Japan. This is an example of ________. A) a born-global company B) a location advantage C) third-party exporting D) incremental internationalization

Compared with a forward contract, a futures contract ________. A) is more flexible B) is normally available through commercial banks C) does not guarantee a future exchange rate D) is only traded on an exchange

If a foreign currency is quoted in American terms (the direct quote) and the forward rate for a foreign currency is less than the spot rate, the foreign currency is selling at a ________. A) forward premium B) backward discount C) backward premium D) forward discount

Imports can stimulate exports by ________. A) redistributing the work force B) curtailing domestic competition C) generating more tax revenue D) increasing foreign income

A customs broker or other import consultant can help an importer minimize import duties by ________. A) bypassing duty rebates available through drawback provisions B) incurring duties by using non-bonded warehouses and foreign trade zones C) maximizing liability by improperly marking an import's country of origin D) valuing products in such a way that they qualify for more favorable duty treatment

In designing an export plan, managers initially do all of the following EXCEPT ________. A) sequence tactics B) specify objectives C) assess resources D) organize financial support

In most cases, which type of government protection assistance is most controversial? A) business development services B) foreign business contacts C) trade expositions D) tariffs

Which of the following countries is an important offshore financial center? A) Turks and Caicos B) Mexico C) South Korea D) Bermuda

________ focus on offering banking and other financial services to nonresident customers. A) Subsidiary banks B) Branch banks C) Affiliated banks D) Offshore financial centers

How does arbitrage differ from speculation? A) Speculation, unlike arbitrage, is never used to protect against risk. B) A speculator buys or sells foreign currency with the hope that that currency will either weaken or strengthen in the future, resulting in a profit. C) Speculation is the purchase of foreign currency on one market for the immediate resale on another market. D) Arbitrage is another way to speculate for profit or protect against risk.

Hudson Manufacturing is an MNE based in the United States with operations in Asia. The firm is considering expansion into the European Union. Which of the following questions is most relevant to the decision? A) What is the primary language of most workers? B) Which country has the best production location? C) Which currency has the most favorable value of the euro? D) Which country has the lowest tariffs for manufactured products?

Anita, an employee at ABX Partners, a hedge fund firm, has purchased euros because she believes that the euro will strengthen against other currencies. Which term best describes Anita's activities? A) arbitrage B) speculation C) spot transaction D) outright forward

Because the size of the market increases when trade barriers fall, companies can increase their production, which will result in lower costs per unit. This phenomenon is known as ________. A) trade creation B) economies of scale C) diseconomies of scale D) increased competition

Companies are likely to export products abroad in all of the following situations EXCEPT ________. A) when their average cost per unit of home country production declines substantially by increasing output B) when they want to use the riskiest but most profitable method to engage international trade C) when they aim to increase degree of market diversification D) when they are new to international business

Companies most likely use the foreign-exchange market to ________. A) diversify their expenses from other sources B) convert money for use in financial transactions C) increase their presence on the black market D) acquire currency from emerging markets

Companies most likely use the foreign-exchange market to ________. A) establish fair currency trading policies B) facilitate regular business transactions C) establish a global market presence D) diversify their hedge funds

Country X has a floating rate for luxury goods and a lower rate for semi-manufactured goods. Which of the following is most likely used by Country X? A) import deposit requirements B) multiple exchange rates C) import licensing D) quantity controls

The ________ is the European Union's ultimate decision-making body and is composed of the different ministers of the member countries. A) European Commission B) Council of the European Union C) European Parliament D) European Court of Justice

Countertrade is an efficient way of doing business.

Most trade groups contain countries in the same area of the world, even though neighboring countries usually lack a common history and interests.

NAFTA is an example of a common market.

The Eurocurrency market is a retail, rather than wholesale, market.

The Eurocurrency market is limited to exchanges that include the euro.

The European Commission is the European Union's ultimate decision-making body and is composed of the different ministers of the member countries.

The International Fisher Effect implies that the country with the higher interest rate should have lower inflation.

The Japanese yen is an example of a soft currency.

The SDR is equal in value to the U.S. dollar.

False

An ADR is a negotiable certificate issued by a U.S. bank in the United States to represent the underlying shares of a foreign corporation's stock held at a custodian bank in the foreign country.

An MNE would most likely benefit from converting local currency into its home-country currency when exchange rates are most favorable so it can maximize its return.

An NGO is a private institution independent from the government.

An exchange rate is the number of units that buys one unit of another currency.

Companies use the foreign-exchange market to convert money for use in financial transactions.

Countertrade refers to any one of several different arrangements that parties negotiate so that they can trade goods and services with limited or no use of currency.

Demand for a country's independently floating currency is a function of the demand for that country's goods, services, and financial assets.

Each country in NAFTA sets its own tariffs to the rest of the world.

Exporters employ an export management company as part of an indirect exporting strategy.

Fundamental forecasting uses trends in economic variables to predict future rates.

Options are more flexible than forward contracts.

The international regulatory situation for trade is becoming more, rather than less, complex.

Toyota has been successful in Europe by exporting cars to Europe as well as designing and manufacturing cars in Europe for the European market.

Trade creation allows consumers access to more goods at a lower price than would have been possible without integration.

A Eurocurrency is any currency that is banked outside its country of origin.

The ________ of a firm is the share of its total output that is exported. A) freight forward B) incremental export C) export intensity D) intermodal export

The interbank market in foreign exchange is where ________. A) electronic brokerage systems are required B) banks trade currency with each other C) reporting dealers set exchange terms D) remittance payments are made

ADRs that are created at the request of a foreign firm wanting its shares traded in the United States are ________. A) facilitated B) unfacilitated C) sponsored D) unsponsored

In a country with a currency that is not freely floating, the timing of an exchange rate change is often a ________ decision. A) cultural B) consensus C) political D) market

Many economists have predicted that Hong Kong will change its currency system to the ________. A) U.S. dollar B) euro C) yuan D) won

An arbitrageur is an exporter that seeks to conduct countertrade in emerging markets.

A city or country that provides large amounts of funds in currencies other than its own is a(n) ________. A) offshore financial center B) ADR facilitator C) interbank market D) currency regulator

A document requesting payment 30 days after delivery is known as a ________. A) time draft B) sight draft C) spot draft D) futures draft

A form of currency control that often applies to tourism because it limits the amount of currency that someone can get from the bank for foreign travel is known as ________. A) multiple exchange rates B) confidence C) quantity controls D) hard currency

A freight forwarder performs which of the following functions? A) arranging the fastest and cheapest transportation of products to and from foreign suppliers B) taking title to the goods it exports and imports from country to country C) acting as a sales representative in a foreign market D) valuing products that qualify for favorable tariffs

A letter of credit that provides an exporter with the guarantee of another bank in addition to the importer's bank is called ________. A) a confirmed letter of credit B) a time draft letter of credit C) an amendable letter of credit D) a cash in advance letter of credit

A problem that can arise in using trade protectionism to develop international competitiveness for a domestic industry is that ________. A) it is difficult to identify industries that have a high probability of reaching competitiveness B) assistance should be given only if entry barriers to new firms are very low C) the protecting countries lose too much revenue from import duties D) a short product life cycle makes the industry quickly noncompetitive

A(n) ________ operates on a contractual basis and provides exclusive representation for an exporter's goods and services in a foreign market. A) export management company B) import broker C) invoice agent D) countertrader

All of the following are benefits of countertrade EXCEPT ________. A) decreasing trade protectionism B) increasing access to innovative technology C) developing new trade relationships with foreign companies D) preserving foreign-exchange reserves

All of the following are generally true about trade-displaced workers EXCEPT that they ________. A) move abroad to take new jobs B) earn less in their new jobs than they earned in their old ones C) spend their unemployment benefits on living rather than retraining D) have difficulty finding new work because of educational deficiencies

All of the following are reasons a country might institute import restrictions to improve its balance of trade position with other countries EXCEPT to ________. A) maintain essential industries B) reduce imports and encourage exports C) get comparable access for its companies D) bargain away restrictions by other countries

An argument against limiting exports to unfriendly countries is that ________. A) the costs of the sanctions are borne by innocent people rather than by leaders B) markets cannot be regained after the countries become friendly C) one country's essential product is superfluous to another D) the exporting nation's cultural identity is harmed

An example of an effective commodity agreement is ________. A) the Organization of Petroleum Exporting Countries B) the Organization of Petroleum Importing Countries C) the International Tin Alliance D) the International Cotton Alliance

An example of an electronic brokerage system used to trade foreign exchange is ________. A) Reuters B) Interbank Traders Ltd. C) Bank for International Settlements D) the reporting dealers clearing house

Baldani Manufacturing, an Italian firm, plans to expand into Asia. In order to take advantage of regional trading groups, Baldani will most likely need to change its ________. A) operating strategies B) selection test methods C) bilateral trade agreements D) economic integration methods

In foreign-exchange markets, reporting dealers are ________. A) financial institutions that actively participate in local and global foreign-exchange markets B) located primarily in New York City since U.S. dollars are the most widely traded currency C) controlled by the Bank for International Settlements located in Switzerland D) hedge funds and pension funds monitored by the World Bank

Jason works in finance at an MNE. Part of his job is to invest large sums of money in various markets. His latest transaction was investing $10,000 in British pounds for 120 days, then taking the British pounds and investing them in euros for 90 days, and then converting it all back to U.S. dollars. Jason is most likely participating in ________. A) interest arbitrage B) speculation C) cryptocurrency D) options

MNEs are attracted to regional trading groups because of their large market sizes and production locations, and because they ________. A) are good sources for raw materials B) implement trade restrictions C) offer both internal and external tariffs D) have very little competition

Most trade agreements contain countries in the same area of the world. Why is this so? A) The distances that goods need to travel between such countries are short. B) Distribution channels are not easily established in adjacent countries. C) Adjacent countries are reluctant to coordinate policies. D) Neighboring countries usually lack a common history and interests

Tanya is a manager at a global firm that has operations located in Brazil, India, and Japan. Tanya is in the process of making a fundamental analysis in order to forecast exchange rates in each country. Which of the following is a confidence factor that Tanya should consider in trying to predict exchange rate movements in each country? A) What are the expectations of the market with respect to the political environment? B) Have there been significant national events that have appeared in the news lately? C) At what rates do there appear to be buy and sell orders? D) What trends do the charts show?

Tanya is a manager at a global firm that has operations located in Brazil, India, and Japan. Tanya is in the process of making a fundamental analysis in order to forecast exchange rates in each country. Which of the following questions is most relevant to Tanya? A) What is the cyclical situation in terms of employment and inflation? B) Are the government's intervention practices sustainable? C) What level of credibility does the government have? D) What is the possibility of a national crisis?

Terms of trade refers to ________. A) the quantity of imports that a given quantity of a country's exports can buy B) specific requirements placed on imports and exports at the port of entry or exit C) requirements agreed upon by two countries to regulate bilateral trade D) an account statement showing a country's annual imports and exports

The EU organization that provides political leadership, drafts laws, and runs the daily programs of the EU is the ________. A) European Commission B) Council of Ministers C) European Parliament D) European Central Bureaucracy

The European Union is an example of ________ integration. A) regional B) relative C) global D) bilateral

The Internet supports more companies' efforts to launch a direct exporting strategy by ________. A) providing information quickly and inexpensively B) eliminating the need for highly detailed export plans C) letting software take over customer service responsibilities D) countering the power of electronic data interchange systems

The U.S. catfish industry petitioned the U.S. government for increased taxes on imported Vietnamese fish, claiming that the fish were being sold below the cost of production. The U.S. catfish industry was accusing the Vietnamese fish industry of ________. A) dumping B) using an embargo C) subsidizing D) using offsets

The U.S. dollar is most likely traded widely because it is ________. A) a reserve currency held by many central banks B) one of the oldest and most stable currencies in the world C) monitored by the Bank of International Settlements and the U.S. Federal Reserve D) based on prices of the NYSE, which is the world's largest foreign-exchange center

The ________ approach to corporate taxation is considered double taxation. A) separate entity B) integrated system C) capital gains D) value-added

The central bank in the United States is the ________. A) Federal Reserve System B) U.S. Exchange Reserve C) Board of Governors D) U.S. Treasury

The degree to which a firm funds the growth of a business by debt is known as ________. A) leveraging B) equity financing C) hedging D) after-tax cost of debt

The financial management activity that determines the proper mix of debt and equity is ________. A) capital structure B) long-term financing C) capital budgeting D) working capital management

The global capital market offers all of the following advantages to firms EXCEPT ________. A) short-term financing options B) numerous investment opportunities C) wide array of financing sources D) financing at reduced cost

The international bond market is a major source of debt financing for which of the following? A) world governments B) regional organizations C) small firms D) small businesses

The long-term financing dimension of cash management ________. A) deals with the selection, issuance, and management of long-term debt and equity B) is unaffected by currency changes because everyone borrows in U.S. dollars C) focuses on the analysis of investment opportunities D) is independent of the capital structure of an MNE

The long-term financing dimension of financial management ________. A) deals with the selection, issuance, and management of long-term debt and equity B) is unaffected by currency changes because everyone borrows in U.S. dollars C) focuses on the analysis of investment opportunities D) is independent of the capital structure of an MNE

The major objective of the European Central Bank is to ________. A) set monetary policy for EU countries that adopt the euro B) ensure that EU interest rates are equal to U.S. rates C) control taxes as a means of monitoring EU debt D) reduce spending by EU countries

The major trade group in South America involving Brazil, Paraguay, Uruguay, and Argentina is ________. A) Mercosur B) UNASUR C) APEC D) CAN

The primary responsibilities of the ________ are the assessment and collection of all duties, taxes, and fees on imported merchandise, the enforcement of customs and related laws, and the administration of certain navigation laws and treaties. A) U.S. Customs and Border Protection B) U.S. Secret Service C) Internal Revenue Service D) Food and Drug Administration

The primary result of the Jamaica Agreement was to ________. A) allow greater exchange-rate flexibility B) set austerity measures for debt control C) establish a system based on par values D) implement fixed exchange rates

The role of most commodity agreements now is to ________. A) discuss issues and disseminate information about commodities B) keep consumer countries from controlling commodity prices C) allow producer countries to control inflation by keeping commodity prices low D) stabilize prices through regional alliances between producer and consumer countries

The term protectionism, when applied to international trade, refers to ________. A) governmental restrictions and competitive support actions to affect trade flows B) payments to dock workers to prevent pilferage of imported shipments C) border checks to prevent entry of illegal aliens D) methods used to prevent intellectual property theft

There are several reasons for a company to sell products abroad at either below cost or below the price in the home country. Which of the following is one of these reasons? A) encouraging foreign consumers to try new products B) improving the exporting country's terms of trade C) gaining imports that are sold below cost D) following import substitution objectives

Under NAFTA, rules of origin ensure that ________. A) only goods produced mostly within the region are eligible for liberal tariff conditions B) only American products are shipped to Canada and Mexico duty-free C) all members import products only from member nations D) all members have the same external and internal tariffs

Under the WTO agreement, ________. A) a dispute resolution mechanism allows countries to bring grievances to the WTO against countries that levy inappropriate trade discrimination measures B) there is no dispute resolution mechanism except for trade involving environmental products C) countries are allowed to place trade barriers on member countries with no particular justification, because like GATT the WTO has no enforcement mechanism D) tariffs are permitted to be levied by developed countries against developing countries but not against each other

What is the primary difficulty associated with dismantling developed countries' agricultural subsidies? A) Rural areas in the United States, the European Union, and Japan are disproportionately represented in their governments. B) Developing countries put pressure on developed countries to maintain the subsidies so that they receive food products at a lower price. C) The subsidies are used to counter the commodity agreements set up mainly by developing countries. D) The subsidies are at the consumer, rather than producer, level, and everyone benefits from the lower prices.

What term refers to a currency on deposit outside its country of issue? A) Eurocurrency B) Eurodollar C) Euroyen D) Europound

When the European Union was formed, the size of the market increased for European companies. This is most likely an example of a ________. A) dynamic effect B) static effect C) trade diversion D) trade reflection

When using equity financing, firms run the risk of ________. A) losing a controlling interest to shareholders B) acquiring capital through the sale of shares C) incurring an unmanageable amount of debt D) falling victim to currency exchange rates

Which of the following BEST describes the special drawing right? A) an international reserve asset created to supplement members' existing reserve assets B) the official currency for international trade established by the World Bank C) a substitute for the fixed value of gold as determined by currency rates D) a contribution made by countries to join the IMF

Which of the following are members of NAFTA? A) the United States, Canada, and Mexico B) North America and Latin America C) the United Kingdom, the United States, and Canada D) the United States, Canada, and Brazil

Which of the following best explains why SpinCent decided to export? A) growth opportunities in Asia B) labor demands in the U.S. C) declining tariffs in the EU D) promising market locations in South America

Which of the following has been the LEAST likely outcome of e-commerce on exporting? A) enhancing supply chains B) triggering a rise in born globals C) overcoming capital limitations for SMEs D) expanding market opportunities for traders

Which of the following has the greatest amount of foreign-exchange reserves in the world? A) China B) Ireland C) Russia D) Taiwan

Which of the following hypothetical examples would be a restriction on the import of services? A) The United States restricts foreign companies from carrying cargo between two U.S. cities. B) Japan restricts North Koreans from visiting Tokyo Disneyland. C) China does not allow the importation of rice from Thailand. D) Canada does not allow Air Canada to buy Brazilian aircraft.

Which of the following is NOT causing greater complexity in the regulation of trade? A) growth in export tariffs B) services available over the Internet C) heightened concern about product safety D) development of new products that must be classified

Which of the following is NOT one of the three main types of importers? A) importers looking for suppliers abroad to concentrate their operating risks B) importers looking for any product around the world they can deliver to local citizens for a profit C) importers looking to foreign-sourcing to get the highest quality products at the lowest possible price D) importers using foreign sourcing to optimize their supply chains

Which of the following is a characteristic of most offshore financial centers? A) political stability B) services for residents C) accounting scandals D) a lack of legal expertise

Which of the following is a characteristic of the Eurocurrency market? A) The Eurocurrency market is both short and medium term. B) Private borrowers are the major players in the Eurocurrency market. C) The Eurocurrency market is a retail, rather than wholesale, market. D) The interest rates in the Eurocurrency market are about the same as in domestic markets.

Which of the following is an example of interest arbitrage? A) investing in debt instruments in different currencies or different countries B) selling U.S. dollars for Swiss francs, then selling Swiss francs for British pounds, then selling British pounds for U.S. dollars C) investigating different commercial banks to find the best exchange rate D) an American investing in a London-based company

Which of the following is the price at which the trader is willing to sell foreign currency? A) offer B) bid C) spread D) cross rate

Which of the following members of the European Union has NOT adopted the euro? A) Denmark B) Estonia C) Germany D) Greece

Which of the following statements BEST describes a limitation of the Big Mac Index? A) Profit margins vary by the strength of competition, which affects relative prices. B) The theory of PPP incorrectly assumes that there are barriers to trade. C) The Big Mac represents all possible commodities and services. D) Taxes have no effect on Big Mac prices.

Which of the following states that the country with the higher interest rate should have the higher inflation? A) the Fisher Effect B) the International Fisher Effect C) the Interest Rate Inflation Theory D) the Forward Rate Theory

Which term refers to money denominated in the currency of another nation or group of nations? A) foreign exchange B) foreign subsidy C) export tariff D) quota

Which term refers to restricting imports in order to boost domestic production and consumption of goods that would otherwise be imported? A) import substitution B) terms-of-trade C) most-favored nation D) in-sourcing

Why are offsets considered protectionist measures? A) Exporters must often find markets for goods outside their lines of expertise. B) Exports must be sold at a certain percentage price below the price of domestic producers. C) Companies must submit samples to government authorities before receiving export permission. D) Trading companies must incur additional inventory carrying charges and pay significantly higher tariffs.

________ effects of economic integration are the overall growth in the market and the impact on a company caused by expanding production and by the company's ability to achieve greater economies of scale. A) Dynamic B) Static C) Economic D) Barrier

A ________ results when free mobility of factors of production is added to a customs union. A) customs union B) common market C) free trade agreement D) regional trade agreement

A black market exists when ________. A) a country closely monitors and adjusts the foreign-exchange rate B) people pay more for hard currency than the official rate C) a country is running a budget surplus D) a country is experiencing a recession

A driving factor for the growth in imports is the impact of ________. A) government programs B) labor specialization C) consumer preferences D) social trends

A free trade agreement is likely to increase efficiency because of ________. A) decreased competition B) increased competition C) decreased trade diversion D) decreased trade creation

A major challenge faced by Western Union in wiring money between the United States and Mexico is that ________. A) it can only transfer funds in one direction B) it is facing competition from some commercial banks C) Mexican citizens do not like to use its services because it does not have strong ties with Mexican banks D) Mexican citizens trust the banks but do not trust Western Union due to its heritage as a Western bank

A negotiable certificate issued by a U.S. bank to represent the underlying shares of a foreign corporation's stock is called a(n) ________. A) Euroequity B) American Depositary Receipt C) Global Depositary Receipt D) European Depositary Receipt

A possible drawback to the essential industry argument for import protectionism is ________. A) that such protection hurts the protecting country's balance of payments B) in times of military emergency, almost any product could be considered essential C) other countries find supplies elsewhere D) unemployment increases in the protecting country

A(n) ________ is a large, liquid financial asset that can be traded anywhere at any time. A) international stock B) global bond C) global equity D) Eurodollar

According to regional content rules, at least ________ of the net cost of most products must come from the NAFTA region in order to get access to the tariff reductions of NAFTA. A) 62.5% B) 50% C) 45% D) 40.5%

According to the optimum tariff theory, a foreign producer will most likely ________. A) ship highly taxed goods internationally on a per-unit basis B) lower its export prices if the importing country imposes an import tax on its products C) assess a tax on goods shipped internationally based on a percentage of the goods' value D) seek import tariffs by using the comparable access argument

According to the text, which currency is expected to experience the most change in the upcoming years? A) yen B) yuan C) euro D) U.S. dollar

Albert, an employee at Morgan Stanley, has been given the task of handling the foreign exchange for a customer who is moving from Brazil to Switzerland in one week. Which of the following should Albert most likely use when exchanging the client's Brazilian reais for Swiss francs? A) spot rate B) cross rate C) currency option D) current U.S. rate

All of the following are common problems associated with exporting and importing EXCEPT ________. A) managing financial risks B) finding reliable intermediaries C) matching foreign rivals' prices D) establishing distribution networks

All of the following are part of the global financial system EXCEPT the ________. A) New York Stock Exchange B) World Trade Organization C) International Monetary Fund D) Bank for International Settlements

An NGO is ________. A) an agency of the United Nations B) a private institution independent of a government C) any organization working on environmental issues D) an organization that is concerned only with workers' rights

Anderson Enterprises is a U.S. firm that manufactures light fixtures for commercial and residential consumers. Anderson is looking to expand internationally, so the firm should most likely ________. A) focus on developing new recruitment strategies and selection tests B) change their organizational structure to fit the norms of the foreign country C) disregard changes in trading groups because they have little effect on a company D) look to expand beyond the triad regions currently controlled by the top 500 MNEs

As described in the opening case, SpinCent's CEO analyzed foreign markets, assessed industries, prepped his company, traveled overseas, and hired trustworthy distributors. SpinCent manages the export process including making and marketing its products for foreign buyers. The nature of these activities shows that the leadership of SpinCent is committing the company to ________. A) countertrade B) direct exporting C) indirect exporting D) third party logistics

Assume a government places restrictions on a specific product from a specific foreign country. What would be the government's most likely concern about the foreign country's response? A) the foreign producers raising the prices of their exports B) the foreign country restricting its own imports C) the foreign country restricting its exports in that industry D) the foreign producers seeking other markets

Corbin Coffee plans to initiate activities in foreign markets through indirect exporting. The firm is most likely to use ________. A) local managers to pay tariffs and duties B) external specialists to assist in the export process C) the International Trade Administration to monitor exports D) freight forwarders to act as distributors in foreign markets

Countries most likely establish export restrictions to ________. A) ensure their population obtains the goods first B) raise prices in foreign markets C) encourage substitute products D) reduce domestic production

Country X wants to eliminate its balance of trade deficit while simultaneously keeping prices low for imported essentials. Which of the following methods would most likely achieve these dual objectives? A) devaluing its currency B) enacting selective import restrictions C) using tight monetary policies to deflate price levels D) spurring productivity increases through general tax breaks for industry

Craig, a manager at a global firm, is studying the cyclical nature of growth and employment as a part of the process to forecast exchange rates. Which factor is Craig most likely monitoring? A) the institutional setting B) fundamental analyses C) cultural analyses D) circumstances

Depositary receipts traded outside the United States are called ________ depositary receipts. A) Euro B) Global C) American D) None of the above

Firms most likely borrow money in the international bond market to ________. A) guarantee high yields and low rates B) enable diversification of funding sources C) protect against costly government regulations D) allow emerging markets to invest in foreign exchange

Forecasters must predict the magnitude, direction, and ________ of an exchange rate change or movement. A) length B) timing C) altitude D) depth

Foreign source income that is derived from the active conduct of a trade or business and therefore subject to U.S. taxation is known as ________. A) passive income B) active income C) uncontrollable foreign corporation income D) tax haven income

Fully convertible currencies are also called ________. A) external currencies B) hard currencies C) unlimited currencies D) soft currencies

Gomez Enterprises, a firm based in Mexico City, exported 1,000 circuit boards to Taylor Industries, a firm based in Chicago. Taylor received a document from Gomez that requests immediate payment for the goods. Gomez has most likely sent a ________. A) time draft B) sight draft C) spot draft D) futures draft

If Toranaga-san, who works for a Japanese trading company that operates in Japanese yen, wanted to purchase Spanish castanets from a company in Barcelona and needed euros to complete the transaction, he would use the ________ to gain access to spot euros. A) stock market B) foreign-exchange market C) New York Stock Exchange D) international export market

If a Big Mac costs $3.41 in the United States and $2.67 in Argentina (the price of a Big Mac in Argentine pesos converted into dollars at the spot exchange rate), which of the following is most likely true? A) The peso is overvalued against the dollar. B) The dollar is overvalued against the peso. C) It should be harder for a U.S. tourist to buy a leather coat in Buenos Aires because the dollar won't go very far. D) It will be cheap for Argentine companies to invest in the United States because the dollar is relatively weak.

If a foreign subsidiary is located in a low tax country, the parent company would probably use a ________. A) high transfer price on inventory shipped from the parent to the subsidiary B) high transfer price on goods sold by the subsidiary to the parent C) low transfer price on inventory shipped from the subsidiary to the parent D) tax credit price to minimize local tax liabilities

If the euro continues to remain strong against the U.S. dollar, which of the following strategies would make the most sense for BMW? A) It might be advantageous for BMW to consider exporting from Germany to the United States to take advantage of cheaper costs. B) It might increase its manufacturing capacity in the United States to take advantage of the cheaper dollar. C) It might consider raising prices in the United States to earn more profits for BMW. D) It really doesn't make any difference to BMW since consumers will buy the cars no matter what they cost.

In a ________, one party directs another party to make payment. A) reverse letter of credit B) commercial bill of exchange C) commercial bill of trade D) confirmed irrevocable foreign-exchange transaction

In a country like Russia, where there is a great deal of corruption, an MNE would most likely use ________ to fund corporate activities. A) equities B) debt C) cash D) countertrade

In international trade, what is a quota? A) a guarantee by one country to buy some minimum amount from another B) a quantitative limit on the amount of a product that can be imported or exported C) a countertrade arrangement that establishes the value of imports and exports D) a bilateral agreement calling for mutual access to markets

Iverson Products is a U.S. firm that is considering expanding internationally by exporting. Which of the following is the LEAST likely benefit for Iverson? A) boosting marketplace flexibility B) improving economies of scale C) facing lower business risk compared to other foreign market entry options D) requiring fairly few resources

Korman Industries is a foreign multinational that recently established operations in the European Union. What is the most likely advantage for Korman as a result? A) Governance processes are streamlined because local governments have been eliminated. B) Market size is larger because of the elimination of internal tariff barriers. C) Differential external tariff barriers exist for product shipments. D) The EU uses English as its official language.

Libor is best defined as the ________. A) interest rate of the National Bank of London B) short-term interest rate for dollars held in the Eurodollar market C) interest rate of the European Union D) deposit rate that applies to commercial loans in the European Union

MNEs most likely use offshore debt markets ________. A) to hide their cash from tax authorities B) to take advantage of their ability to access capital in different countries C) since debt in foreign countries is always cheaper than in the home-country market D) because investors don't like to invest in companies that only raise capital in their home markets

Members of the Andean Community (CAN) have a common external tariff. CAN is most likely a ________. A) free trade agreement B) customs union C) domestic trade zone D) free trade sovereignty

Most countries have agreed on how to assess values when their customs agents levy tariffs. Which of the following best expresses this agreement? A) They should use the value of similar goods arriving at about the same time. B) They should use the declared invoice price unless they doubt its authenticity. C) They should assess a value based on local costs to produce a similar product. D) They should assess a value based on the expected final consumer sales price.

NAFTA is a good example of ________. A) trade divestment B) trade diversion C) the theory of trade disruption D) the theory of trade implementation

Outright forward transactions involve the exchange of currency on a future date beyond two business days at a fixed exchange rate, known as the ________. A) spot rate B) forward rate C) option rate D) reverse transaction rate

Research has shown that past exchange rates are an accurate predictor of future exchange rates ________. A) only in the long run B) only in the very short run C) only during times of economic crisis D) only during times of economic calm

Sarah, a manager at Farley Enterprises, an MNE with operations in Asia, Europe, and North America, is using past trends in exchange rate movements to spot future trends. Which type of forecasting approach is Sarah most likely using? A) fundamental B) technical C) application D) economic

Stella, who works and lives in San Diego, wants to send money to her mother who lives in a small village south of Puerto Vallarta, Mexico. Stella typically uses Western Union to handle the transaction. Which of the following is the most likely reason that Stella uses Western Union? A) no fees B) convenience C) low exchange rates D) cross rate capability

The Bretton Woods Agreement established a system of fixed exchange rates under which each IMF member country set a ________. A) quota B) par value C) gold standard D) nominal interest rate

The CFO's function in a company focuses on ________. A) improving distributor relationships B) acquiring financial resources C) handling accounting issues D) creating financial statements

The International Fisher Effect implies that ________. A) the country with the higher interest rate should have lower inflation B) the currency of the country with the lower interest rate will strengthen in the future C) the currency of the country with the higher interest rate will strengthen in the future D) interest rates and inflation are not linked at all

The incremental internationalization view of exporting holds that companies first target countries that are ________ their home market. A) different from B) similar to C) smaller than D) larger than

The industrialization argument for trade protection in developing countries is based on the assumption that ________. A) the protected industry will become competitive over time with economies of scale B) unemployment and underemployment exist in rural areas, so little agricultural output is lost as people move into industrial jobs C) subsidizing production is a better means of protection than limiting imports D) it is better to depend on buying agricultural surpluses from developed countries than to produce these agricultural goods Answer: B

The most common type of tariff is the ________ tariff. A) export B) import C) transit D) ad valorem

The primary objective of the International Monetary Fund is to ________. A) encourage euro adoption B) promote exchange rate stability C) establish a unilateral system of payments D) foster the power of the foreign-exchange market

The principle by which the tax authorities allow firms to reduce their tax liability by the amount of income taxes paid to foreign governments is known as ________. A) transfer pricing B) a tax credit C) lag strategies in tax planning D) passive income reductions

The purchasing power parity theory claims that a change in relative ________ between two countries must cause a change in ________ in order to keep the prices of goods in two countries fairly similar. A) exchange rates; inflation B) inflation; exchange rates C) interest rates; inflation D) interest rates; exchange rates

The relationship between import substitution policies and export-led development policies is best characterized by which of the following? A) Import-substitution policies are more likely to lead to production of mature products, whereas export-led development policies result in production of growth products. B) The two are hard to distinguish because production under import substitution may eventually be exported. C) Production under import substitution policies, as opposed to export-led development policies, is more likely to be located in urban areas. D) Production under import substitution policies, as opposed to export-led development policies, is likely to be more labor-intensive.

The relationship between the value of the Brazilian and Chinese currencies is known as the ________. A) stock price B) exchange rate C) foreign-exchange market D) purchasing power parity

Ultimately, countertrade is an inefficient way of doing business because it ________. A) encourages buyers and sellers to use customs brokers to handle exchanges B) requires buyers and sellers to negotiate a fair value on the exchange C) reduces the risk that the goods sent as payment are of poor quality D) eliminates the potential for price and financial distortion

Unemployed workers are most apt to form a pressure group to support ________. A) export restrictions B) import restrictions C) price limitations D) import subsidies

Western Union's role in foreign-exchange trading is best described as ________. A) setting a fair exchange rate in multiple currencies B) transferring currency from one country to another C) transferring Mexican pesos from the United States to Mexico D) handling all money transfers that occur between North and South America

What is a Eurodollar? A) a euro held by an American B) a U.S. dollar deposited in a European bank C) a euro deposited in a U.S. bank. D) any currency deposited in a country other than the country of issue

What is the primary concern about offshore financial centers? A) engaging in illegal activities B) enabling firms to avoid taxation C) allowing the transfer of large funds D) existing in politically risky environments

When selecting a commercial and/or investment bank to deal in foreign exchange, corporations are most likely to use ________. A) the exchange-based market rather than the over-the-counter market B) more than one bank to meet different needs C) banks located in the home country D) investment banks only

Which of the following accurately explains how producers are affected by exchange rate changes? A) To save money, a manufacturer may decide to relocate production to a country with a stronger currency. B) A manufacturing firm relocating to a country with a weak currency can make a cheap initial investment. C) Goods manufactured in a country with a weak currency may be relatively expensive in world markets. D) A manufacturer with high operating expenses would likely relocate production to a country with a currency that is gaining value.

Which of the following countries has the largest market for domestic bonds? A) United Kingdom B) United States C) Japan D) China

Which of the following groups of countries is most likely to form a regional trading group? A) India, Argentina, France B) Canada, United States, Mexico C) Brazil, Ukraine, Japan D) Spain, South Africa, Mongolia

Which of the following has extensive banking activities involving short-term financial transactions? A) booking center B) operational center C) foreign-exchange market D) international regulatory market

Which of the following is NOT a primary duty of the U.S. Customs and Border Protection? A) assessing all duties, taxes, and fees on imported merchandise B) collecting import and export tariffs C) protecting the U.S. from threatening imports D) policing smuggling operations

Which of the following is NOT one of the top exchanges that trade in foreign currency futures and options? A) CME B) UBS C) NYSE Liffe D) NASDAQ OMX

Which of the following is Walmart's competitive advantage in Mexico? A) Walmart purchased all Mexican retail chains and eliminated competitors. B) Walmart is able to transfer its "everyday low prices" concept to Mexico. C) Walmart offers affordable, unique products for niche markets in Mexico. D) Customers prefer to buy from American companies instead of Mexican companies.

Which of the following is most likely a benefit for firms that participate in the global capital market? A) numerous investment opportunities B) large pool of financing sources C) equally balanced capital structure D) quick sale of stocks and bonds

Which of the following is most likely a true statement about the relationship between the United Nations and NGOs? A) The UN must license an NGO for it to be involved in any international relief efforts. B) A UN committee discusses issues of importance to NGOs but does not regulate their activities. C) The UN determines which NGOs can work on international humanitarian issues and relief efforts. D) NGOs typically operate in only one country, whereas UN agencies can operate anywhere in the world

Which of the following is typically NOT an argument used for keeping the U.S. trade embargo with Cuba intact? A) There is not much economic potential from trade given Cuba's small population and low per capita income. B) Removal of the embargo will cause much more Cuban immigration to the United States. C) If the Cuban economy is weakened just a bit more, the Cuban political-economic system cannot be sustained. D) There will be a backlash among countries supplying such commodities as sugar to the United States if the U.S. buys them from Cuba instead.

Which of the following members of the European Union has NOT adopted the euro? A) Denmark B) Estonia C) Germany D) Greece

Which of the following statements about small and medium-sized enterprises (SMEs) is true? A) SMEs are steadily reducing their export intensity ratios. B) SMEs make up the majority of all U.S. exporters. C) SMEs are the source of more than half of the monetary value of U.S. exports. D) SMEs that export goods have fewer than 20 employees.

Which of the following statements most accurately describes the relationship between trading groups and MNEs? A) Trading groups have no influence on the size of the regional market. B) Regional trading groups can define the rules under which companies must operate within that region. C) Companies never need to change their organizational structure to take advantage of regional trading groups. D) Regional trading groups have no influence on an MNE's strategy since they operate worldwide.

Which of the following statements most likely undermines the infant-industry argument? A) Total unit costs decrease through economies of scale. B) High tariffs to prevent foreign competition increase government revenues in the protected country. C) Domestic entrepreneurs need assistance to compete in industries with high entry barriers. D) Experience of operating over time triggers higher productivity and global competitiveness.

Which of the following types of agents moves international cargo, facilitates shipment tracking, and handles product returns for exporters and importers? A) trade intermediaries B) third party logistics C) customs brokers D) freight forwarders

Which of the following was NOT a contributing factor to the turmoil in the global stock market in the last few years? A) a decline in oil prices B) the revaluation of the euro C) emerging markets lowering interest rates D) a rise in interest rates in the United States

Which of the following was NOT a result of the Smithsonian Agreement? A) revaluation of currencies other than the dollar against gold B) establishment of par values the quota system C) devaluation of the dollar against gold D) widening of exchange-rate flexibility

Which of the following was part of the stability and growth pact that was required for countries to be part of the European Monetary Union? A) The annual government budget must be no greater than 3% of GDP. B) The annual inflation rate must remain within 1.5% of the three best-performing EU countries. C) The annual government budget deficit could be no greater than 60% of GDP. D) The annual inflation rate must remain within 5.5% of the four best-performing EU countries.

Which of the following was primarily responsible for establishing the euro? A) Lisbon Treaty B) Treaty of Maastricht C) European Finance Act D) Single European Act

Why are options most likely so attractive to companies? A) The writer of the option does not charge the company any fee for writing the option. B) Options provide companies with more flexibility than a forward contract. C) Options are usually cheaper than forward contracts. D) Options can be used for only foreign-exchange deals.

Why is China most likely considering a greater reliance on the SDR? A) gains in the foreign-exchange market B) concerns about the value of the U.S. dollar C) demands to replace the dollar with the euro for reserves D) requirements by the IMF to make China's currency more flexible

Why should managers have an understanding of trade protectionism? A) Trade protectionism targets factor endowments, thus affecting the best country to locate production. B) Trade protectionism affects a company's ability to sell abroad and ability to compete at home. C) Trade protectionism affects the number of people permitted to practice a specific profession. D) Trade protectionism prevents companies' enactment of merger and acquisition agreements.

________ effects of trade agreements are the shifting of resources from inefficient to efficient companies as trade barriers fall. A) Dynamic B) Static C) Economic D) Barrier

________ integration is the political and economic agreements among countries that give preference to member countries to the agreement. A) Global B) Economic C) Bilateral D) Regional

A bond issue floated by a U.S. company in dollars in London, Luxembourg, and Switzerland by a syndication of bonds is an example of a ________. A) global bond B) domestic bond C) Eurobond D) foreign bond

A bond that is issued by Nestle, a Swiss company, which is denominated in yen and sold to residents of Japan is most likely a ________. A) Eurobond B) global bond C) foreign bond D) country fund

A country's central bank is responsible for ________. A) distributing money to foreign countries that are in a debt crisis B) encouraging disorderly conditions in foreign-exchange markets C) the policies affecting the value of its country's currency D) establishing foreign-exchange markets

A foreign-exchange contract that is an agreement between two parties to buy or sell a particular currency at a particular price at a particular date as specified in a standardized contract to all participants in the specified market is known as a(n) ________. A) spot contract B) forward contract C) futures contract D) equity currency contract

A physician, who is a citizen of and licensed in Country A, meets the professional licensing requirements of Country B. The physician will most likely ________. A) have to pass a language proficiency exam before being allowed to work in Country B B) not be allowed to work in the not-for-profit sector in Country A or Country B for a set period C) have to get a work permit from Country B's immigration authorities to work in Country B D) have to work in the not-for-profit sector in Country B for a period of time before being permitted to work for a profit-seeking organization

A situation in which several banks pool resources in the Eurocurrency market to extend credit to a borrower and spread the risk is known as ________. A) credit collaboration B) leverage equity financing C) syndication D) short-term Eurocurrency financing

A speculator is someone who ________. A) trades foreign exchange illegally B) deals in the black market in currency C) takes positions in foreign-exchange markets to earn a profit D) works for OTC financial institutions rather than non-financial corporations

A technical forecaster is also known as a ________. A) CFO B) de facto economist C) chartist D) monetary administrator

A(n) ________ is the price of a currency. A) tariff B) quota C) exchange rate D) subsidy

Advocates of the comparable access argument for trade protection primarily assert that domestic industries ________. A) will deteriorate in countries that have lower import restrictions than their trading partners B) should be required to implement export-led development policies on foreign competitors C) are entitled to the same access to foreign markets as foreign industries have to their markets D) are forced to lower prices for domestic consumers because of foreign import restrictions

An exporter that implements a(n) ________ strategy does so with the intent to develop its own international marketing capability. A) indirect selling B) freight forwarding C) direct exporting D) export intermediation

An import license is ________. A) an agreement whereby one country gives another country permission to use a patent that a company has registered there B) a requirement that exporters take merchandise in lieu of money as payment for their sales C) a requirement that permission be secured from governmental authorities before importation can be undertaken D) a government prohibition of imports from a specific country

An irrevocable letter of credit ________. A) is issued by a global credit agency B) is the basis for multilateral credit netting C) can be amended only if all parties involved agree D) obligates the exporter's bank to pay interest to the importer

Boyce Dynamics, a U.S. maker of LED flashlights, fills unsolicited orders from foreign buyers. It has not proactively investigated international trade options. Boyce Dynamics is best categorized as a ________. A) regular exporter B) non-exporter C) sporadic exporter D) domestic exporter

Countries sometimes fear that foreign producers are pricing their exports artificially low. This fear is most likely based on the assumption that ________. A) foreign companies will lack the earnings to repay their foreign debt B) insufficient earnings will be available to improve product technology C) foreign producers will charge exorbitant prices after putting competitors out of business D) developing countries will be unable to maintain critical industries needed in times of war

Defense arguments are sometimes used to prevent exports to unfriendly countries. This runs the risk of the targeted country ________. A) becoming politically destabilized B) removing import restrictions C) finding alternative sources of supply D) banding with other countries to form a cartel

Developing countries have sometimes adopted policies to shift people out of agriculture and into industry by protecting manufactured production. One of the problems they have encountered is that ________. A) people have been too reluctant to leave rural areas to go to the cities B) food shortages have increased in rural areas because of worker shortages C) demand for social and political services has increased excessively in the cities D) developed countries have retaliated with protection of products from the developing countries

Export-led development refers to ________. A) a country's efforts to promote its exports in order to reduce its trade deficits B) a policy to promote domestic production of goods that would otherwise be imported C) a program to promote industries with export potential D) decreases in infrastructure development due to the loss of revenue from export tariffs

Foreign branch income is ________. A) deferred from U.S. taxation until a dividend is remitted to the parent company B) considered passive income and therefore not subject to U.S. taxation C) directly included in the parent's taxable income in the year in which it is earned D) considered active income and therefore deferred until future years

Given the daily volume of foreign-exchange transactions, it is most accurate to say which of the following? A) It is impossible for a government's interventions in the foreign-exchange market to affect market psychology. B) A government's intervention in the foreign-exchange market can reverse a currency's slide for the long term. C) A government's intervention cannot force the foreign-exchange market to move in a determined direction. D) A government should focus more on intervening in foreign-exchange markets than on correcting economic fundamentals.

Global integration occurs as countries from all over the world decide to cooperate through the ________. A) EU B) NAFTA agreement C) WTO D) CARICOM

Governments use a multiple exchange rate system to ________. A) increase their budget surplus B) reduce exports C) control foreign-exchange convertibility D) limit deposit requirements

Hard currencies are usually ________. A) not fully convertible B) undesirable assets C) highly liquid D) unstable

Historically, what is the top remittance-receiving country in Latin America? A) Brazil B) Mexico C) Uruguay D) Venezuela

Hudson Manufacturing is an MNE based in the United States with operations in Asia. The firm is considering expansion into the European Union. Executives at the firm are debating whether central Europe or Eastern Europe would be best for the firm. Which of the following best supports a decision to establish operations in Eastern Europe? A) Hudson wants to implement a high-performance work system. B) Hudson plans to staff the foreign facility with local managers. C) Hudson wants to minimize costs by keeping wages low. D) Hudson recently lost money in a joint venture.

If a company from Country A decides to sell merchandise to a company from Country B, then the company from Country A ________. A) will denominate the sale in its own currency since it is too hard to convert foreign currency B) will denominate the sale in the currency of the buyer since it is too hard for them to convert foreign currency C) can denominate the sale in either currency and use the foreign-exchange market to convert currency D) can use the OTC market to convert receipts in the future and the exchange markets to convert receipts in the spot market

If inflation in the United States is relatively higher than inflation in Japan, and the Japanese government wants to keep the exchange rate fixed between the yen and the dollar, it should most likely ________. A) allow its currency to rise against the dollar B) allow its currency to fall against the dollar C) increase the supply of yen in the market D) decrease the supply of yen in the market

If the real interest rate is 5%, the rate of inflation in the United States is 6%, and the rate of inflation in the United Kingdom is 3%, which of the following statements would NOT be true? A) The nominal rate of interest in the United States would be greater than the nominal interest rate in the United Kingdom. B) The difference between the U.K. and U.S. interest rates is a function of the difference between their inflation rates. C) The nominal rate of interest in the United States and the United Kingdom would be the same because of purchasing power parity. D) Investors would get a higher return on their money in the United States.

In the foreign-exchange market, the bid is the rate at which ________. A) the trader is willing to sell foreign exchange B) the buyer is willing to swap foreign exchange C) the trader is willing to buy foreign exchange D) the trader earns a profit

In which of the following transactions is a currency switched with another on one date and then switched back on a future date? A) reverse transaction B) spot transaction C) FX swap D) outright forward transaction

In which of the following transactions is one currency swapped for another on one date and then swapped back on a future date? A) reverse transaction B) spot transaction C) FX swap D) outright forward transaction

Jordan Jewelry is a U.S. firm that designs, manufactures, and sells inexpensive jewelry and accessories. Executives at the firm believe that Jordan Jewelry could significantly increase its profitability by exporting products to foreign markets. Before engaging in international trade, Jordan executives need to develop an export plan. Which of the following questions is LEAST relevant to this activity? A) Would Jordan's resources be better utilized developing business in the United States? B) How much will it cost to get Jordan's products to the targeted markets? C) What marketing campaign would be best for Jordan's foreign markets? D) Is exporting consistent with Jordan's long-term goals?

Melissa, a foreign-exchange trader, wants to buy euros from Stephanie. Which of the following is the price at which Melissa is willing to buy euros? A) spread B) offer C) bid D) cross rate

Morris Lighting is a U.S. firm that wants to start exporting its high-end lighting fixtures to foreign markets. Morris Lighting should seek assistance from U.S. government agencies for all of the following EXCEPT ________. A) organizing trade events that help potential exporters make foreign contacts and explore export opportunities B) understanding how to comply with domestic and foreign trade regulations C) acting as an export marketing department or international department for the company D) providing information about market demographics and product demand

NAFTA was primarily formed because the member nations have ________. A) static and dynamic liberalization policies B) similarly sized economies and resources C) geographic proximity to each other D) competing interests with the EU

On the basis of which interest rate are Eurocredits often quoted? A) United States Prime Rate B) European Central Bank Offer Rate C) London Interbank Offered Rate D) International Monetary Fund Interest Rate

Procter & Gamble exchanges cleaning products for machinery with Russia and Hungary. The nature of this transaction indicates that Procter & Gamble is engaging in ________. A) third-party logistics B) freight forwarding C) countertrade D) e-commerce

Protectionism will most likely affect which aspect of a company's operations? A) selecting employees B) investing short-term capital C) acquiring foreign supplies D) relocating personnel overseas

Ray, a marketer at a global firm, monitors the exchange rate of countries in which the firm sells its products. Ray is most likely concerned about changes in ________. A) operating expenses B) exporting policies C) product demand D) quality control

Since production has shifted to more efficient producers due to comparative advantage, consumers in Country X have had access to more goods at lower prices. Which of the following most likely exists? A) trade specialization B) trade diversion C) trade creation D) trade internalization

Successful trade retaliation is most likely achieved ________. A) on agricultural products B) on manufactured products C) by a large trading country D) by a small trading country

The 27 member EU negotiates trade agreements as one. The EU and Brazil have negotiated a strategic trade alliance which is an example of a ________. A) customs union B) global free trade agreement C) bilateral agreement D) multilateral agreement

The 27-member EU negotiates trade agreements as one. The EU and Brazil have negotiated a strategic trade alliance, which is an example of a ________. A) customs union B) global free trade agreement C) bilateral agreement D) multilateral agreement

The EU organization that ensures consistent interpretation and application of EU treaties is the ________. A) European Commission B) Council of Ministers C) Court of Justice D) Council of Treaties and Laws

The Organization of Petroleum Exporting Countries ________. A) uses import tariffs to control oil prices B) stabilizes prices based on demand C) uses quotas to control oil prices D) produces all of the world's oil

The U.S. catfish industry successfully petitioned the U.S. government to require that catfish varieties imported from Vietnam be labeled as "tra," "basa," or "pangasius." This is an example of which of the following? A) an embargo B) a tariff C) a nontariff barrier D) a direct price influence

The ________ is the common currency of the European Union. A) franc B) pound C) euro D) mark

The ________ is the currency most widely used as a reserve asset. A) euro B) Japanese yen C) U.S. dollar D) British pound

The ________ theory seeks to define the relationship between currencies based on relative inflation. A) inflation growth rate B) revaluation C) purchasing power parity D) interest rate

The best way for a Euroequity to get a listing in the United States is to issue a(n) ________. A) Global Depositary Receipt B) European Depositary Receipt C) American Depositary Receipt D) Domestic Depositary Receipt

The concept of leveraging in finance refers to ________. A) the degree to which companies rely on foreign exchange to fund operations B) how a company hedges its foreign currency obligations C) the degree to which a firm funds the growth of a business by debt D) how much cash the CFO has in the bank

The goal of a ________ is to abolish all tariffs among member countries. A) customs union B) common market C) free trade agreement D) common internal tariff

The pound-dollar forward rate for pounds is $1.9068, and the spot rate is $1.9059. Pounds are selling at a ________. A) discounted premium B) backward discount C) forward premium D) forward discount

The pound-dollar forward rate for pounds is $1.9068, and the spot rate is $1.9100. Pounds are selling at a ________. A) discounted premium B) backward discount C) forward discount D) forward premium

The rationale for the infant-industry argument for trade protection is that ________. A) incubator centers in which business, government, and academia cooperate will develop entrepreneurial companies B) a country should give one firm in an industry a monopoly status so that it will grow large enough to be competitive internationally C) it takes time for an industry to become competitive in world markets, so protection is needed to help this industry pass through the critical period D) lower restrictions should be placed on products coming from countries where a government has a large sphere of political influence

The three major responsibilities of the ________ are legislative power, control over the budget, and supervision of executive decisions. A) European Commission B) European Council C) European Parliament D) European Court of Justice

The value of the SDR is currently based on the ________. A) euro B) U.S. dollar C) weighted average of four currencies D) weighted average of six currencies

This spring break you are planning to leave the United States and visit London, where you will stay in a hotel for 10 days. The London hotel will be performing a(n) ________. A) indirect merchandise export B) merchandise export C) service export D) service import

Trade shifting to countries within a regional trade agreement at the expense of trade with countries not in the agreement is called ________. A) a dynamic effect B) trade creation C) trade diversion D) economy of scale

Vandelay Designs is a small firm based in Boston that makes and sells scrapbooking products through its retail store and Web site. Many of Vandelay's first sales were made to customers located in Canada, England, and Japan. Vandelay Designs would best be identified as a(n) ________. A) incremental exporter B) occasional exporter C) born global D) geo-expo

What is the most likely reason that consumers rarely protest import restrictions that raise the prices they pay for a specific product? A) They reason that if the import restrictions are removed, the foreign producers will raise their prices to those of the domestic producers anyway. B) Many countries prohibit consumers to band together to influence political actions. C) Typically, although the added costs to consumers for a given product are high in aggregate, they are fairly trivial for most individual consumers. D) They reason that if they do something to hurt domestic employment for one product, the displaced workers will then do something that will hurt their own employment.

Which EU country has NOT adopted the euro? A) Germany B) France C) Denmark D) Greece

Which of the following handles the majority of all foreign-exchange activities? A) multinational enterprises B) commodities exchanges C) commercial banks D) regional banks

Which of the following is NOT a potential problem of using export controls? A) There is an incentive for other countries to develop production of their own. B) Domestic producers may have less incentive to increase output. C) Prices go up in the country imposing the controls. D) There is more incentive for smuggling.

Which of the following is NOT an advantage associated with Eurocurrencies? A) more convenience for users B) better yield for lenders C) tighter U.S. regulation D) cheaper lending rates

Which of the following is NOT an example of a service export? A) a management firm providing advice to a foreign client B) an investment bank arranging financing for a foreign firm C) a coffee chain opening a new store in a foreign country D) an engineering firm building roads in a foreign country

Which of the following is NOT one of the three common ways that private trade intermediaries are paid by exporters? A) commission rate B) buy-sell basis C) fixed salary D) special event contribution

Which of the following is a characteristic of most offshore financial centers? A) strict domestic regulation B) minimal banking activities C) large foreign currency markets D) nominal or non-existent tax rates

Which of the following is a unique provision of NAFTA? A) tariff elimination B) common currency C) environmental standards D) immigration oversights and policies

Which of the following is most likely true regarding options? A) An option can only be purchased from a commercial bank. B) Options are never used with foreign currency. C) An option is a right to sell foreign currency. D) Options do not provide firms with flexibility.

Which of the following is typically true of an export management company? A) It is usually a division of a manufacturing company. B) Most EMCs in the United States are large, representing a wide range of products and large number of companies. C) It operates on a contractual basis for a manufacturer by helping obtain orders for its clients' products. D) It usually takes title to products rather than acting as an agent.

Which of the following primarily triggered Toyota's investment in the European Union? A) Europeans demanded affordable, high quality cars from Japan. B) A common currency gave Europeans more buying power. C) The EU lowered trade barriers on foreign auto imports. D) Japan and the EU formed a free trade agreement.

Which of the following problems with the euro most likely worsened the financial crisis in Greece? A) excessive flexibility with interest rates B) cultural disagreements on labor reform C) lack of uniform fiscal regulation standards D) unclear policies of the European Central Bank

Which of the following transactions refers to the sale of goods or services produced by a company based in one country to customers that reside in a different country? A) importing B) countertrading C) exporting D) freight forwarding

Which of the following would have the LEAST influence on price setting in the foreign-exchange market? A) Morgan Stanley B) Deutsche Bank C) Western Union D) JP Morgan

Which term refers to a tariff or duty assessed as a percentage of an item's value? A) specific duty B) effective tariff C) ad valorem duty D) compound tariff

Why is London most likely the top market for trading foreign exchange? A) The British pound is the world's top trading currency. B) Most multinational firms are headquartered in London. C) London is uniquely positioned geographically in terms of time zones. D) British traders have always been the most sophisticated in the world.

________ is a form of locking the value of a country's currency onto another currency. A) Managed floating B) Monetarization C) Dollarization D) Floating

________ is the price between two companies that most accurately reflects the market price. A) Economy price B) Promotional price C) Arm's length price D) Average cost

________ refers to any one of several different arrangements that business parties negotiate so that they can trade goods and services with limited or no use of currency. A) Factoring B) Offset C) Countertrade D) Barter

57) Which of the following statements about the euro is true? A) It was adopted by all existing EU members when it was first initiated. B) It must be adopted by countries as a precondition to joining the EU. C) It cannot be used by countries that are not members of the EU. D) It was designed to eliminate currency as a barrier to trade in the EU.

A Chief Financial Officer (CFO) in an international company would most likely be responsible for all of the following activities EXCEPT ________. A) managing short-term capital needs B) making financial decisions C) making investment decisions D) managing employee repatriation

A bond issued by a Brazilian company in British pounds in London is a ________. A) Eurobond B) global bond C) local bond D) foreign bond

A firm would decide to delist its stock from a foreign stock exchange for all of the following reasons EXCEPT ________. A) the best price for the stock is in the home market B) there is increased regulation in that particular foreign market C) there are weak market returns on the stock D) there are high trading volumes on the stock

A voluntary export restriction (VER) refers to ________. A) an agreement between two countries to reciprocally restrict exports to one another B) requests by governments for companies to limit exports of militarily useful technology C) limiting companies' exports to increase domestic supplies D) limits placed on exports by a government of an exporting country at the request of the government of an importing country

A(n) ________ is the right but not the obligation to buy or sell a foreign currency within a certain time period or on a specific date at a specific exchange rate. A) forward rate B) bid C) offer D) option

As a trading currency, the euro is ________. A) more widely traded than the U.S. dollar in seven of the top ten currency markets in the world B) widely traded in London but not in any other major foreign-exchange markets in the world C) becoming more popular than the U.S. dollar because of its global acceptance D) gaining ground against the U.S. dollar in Eastern European countries

Assume a government is considering import restrictions on sugar because sugar imports are hurting the domestic industry. Which of the following groups is LEAST likely to speak out on the subject? A) politicians in areas that grow sugar B) employees of sugar companies C) sugar company owners D) sugar consumers

Assume that U.S. companies are importing the same product from Mexico and Taiwan. The United States enters into an FTA with Mexico but not with Taiwan. Consequently, the United States begins to import more goods from Mexico (due to lower tariffs) than from Taiwan, even though the Mexican products are not any better or cheaper. This is most likely an example of ________. A) trade specialization B) trade internalization C) trade creation D) trade diversion

Compared to the European Union, the North American Free Trade Agreement ________. A) has a stronger currency linkage due to the U.S. dollar B) has more trade problems since it is a customs union C) is significantly larger in population and total GNI D) is slightly smaller in population and GDP

Countertrade is an alternative means of structuring an international sale when ________. A) natural resources are highly desirable B) an importer is able to obtain a bank loan C) an importer does not belong to the World Bank D) conventional forms of payment are difficult, costly, or nonexistent

Country A and Country B make an agreement to cooperate more closely and implement tariff reductions. Which of the following best describes this agreement? A) double commodity integration B) multilateral integration C) regional integration D) bilateral integration

Country X is withholding goods from international markets in an attempt to raise prices abroad. Such actions will be most effective for Country X if the nation ________. A) supports the development of substitutions B) provides domestic industries with tax breaks C) receives low-interest loans from foreign banks D) holds a monopoly on the product or resource

Endaka, the "high yen," caused financial problems for ________. A) Japanese foreign-exchange reserves B) American foreign-exchange reserves C) Japanese importers D) Japanese exporters

Exporting below cost or below the home country price is called ________. A) countertrade B) an export-led development policy C) a strategic trade policy D) dumping

Federal, state, and local governments that recognize the benefits of international trade, actively aid the efforts of potential and active exporters and ________. A) ensure the quality of exported products B) establish barriers to punish foreign rivals C) collect a fee for each successful export sale D) protect the interests of struggling importers

Fundamentally, countertrade is best described as a(n) ________ transaction. A) simple B) common C) desirable D) inefficient

In conducting ________, a business sells goods directly to or through an independent domestic intermediary in the exporter's home country that exports the products to foreign markets. A) direct exporting B) global marketing C) strategic planning D) indirect exporting

In nearly half the cases in which U.S. firms have requested protection from imports, one or more U.S. companies in the industry opposed the protection. What was the reason for opposing protection? A) They did not want consumers to have to pay higher prices that would result from protection. B) These were foreign-owned companies that saw the opportunity to serve the U.S. market. C) They feared that they would lose foreign export markets because of retaliation. D) They believed that they could compete against global and domestic rivals.

In order to join the IMF, a country must contribute a certain sum of money, called a ________. A) special drawing right B) trade balance C) monetary reserve D) quota

In the spot market, the ________ is the difference between the bid and offer rates and is the trader's profit margin. A) bid B) offer C) cross rate D) spread

It is easier to predict the ________ of a change than the ________ of a change in exchange rates. A) altitude; magnitude B) depth; length C) timing; depth D) direction; magnitude

It is sometimes contended that by imposing import controls a country might be able to increase its exports. This contention is premised on ________. A) the country's simultaneous currency depreciation, which decreases the price of its exports B) using the import taxes to institute efficiency measures in potential export industries C) raising domestic prices in one industry so that the excess domestic profits in that industry can compensate for the cost of dumping products from another industry into foreign markets D) getting other countries to maintain or relax their current import restrictions instead of escalating restrictions in a trade war

Managers should understand the effect of trade protectionism because ________. A) trade protectionism may limit the number of people permitted to practice a specific profession B) trade protectionism requires the payment of high insurance rates to transport goods internationally C) trade protectionism may prevent companies' enactment of merger and acquisition agreements D) trade protectionism may make it difficult for a company to buy what it needs from foreign suppliers

People who argue for lifting the U.S. trade embargo with Cuba claim all of the following EXCEPT ________. A) the embargo has not achieved its purpose of changing Cuba's economic and political system B) U.S. companies lose Cuban sales to competitors from other countries C) increased exposure to the United States would be a more effective force of change D) Cuba has largely become a market economy already

Subpart F income is ________. A) usually earned by a branch rather than a corporation B) not taxed to the parent unless a dividend is remitted C) not eligible for the tax credit D) passive and usually derived from operations in a tax-haven country

Tax-haven subsidiaries categorically referred to as International Offshore Financial Centers have all of the following characteristics EXCEPT ________. A) a low tax on foreign investment or sales income earned by resident corporations and a low dividend withholding tax on dividends paid to the parent firm. B) a stable currency to permit easy conversion of funds into and out of the local currency. This requirement can be met by permitting and facilitating the use of Eurocurrencies. C) a stable government that encourages the establishment of foreign-owned financial and service facilities within its borders. D) All of these answer choices are characteristics of tax-haven subsidiaries.

The CEO of Coffman Enterprises wants to export products to foreign markets. However, top executives at Coffman are concerned that the firm will face fierce competition from foreign rivals because Coffman lacks significant core competencies. The executives are most likely worried that Coffman lacks ________. A) capital advantages B) internalization advantages C) location advantages D) ownership advantages

The Fed wants to counter downward pressure on the dollar, so it will most likely ________. A) sell dollars for foreign currency B) sell dollars and buy foreign stocks C) buy Treasury bills with dollars D) buy dollars with foreign currency

The International Fisher Effect ________. A) links interest rates and inflation B) implies that the currency of the country with the lower interest rate will weaken in the future C) implies that the country with the higher interest rate should have lower inflation D) links interest rates and exchange rates

The OECD is concerned about transfer pricing practices because ________. A) transfer pricing can help maximize a company's worldwide tax liability B) transfer prices tend to be higher in industrial than developing countries C) governments use transfer prices to manipulate companies' investment strategies D) companies use transfer prices to manipulate prices and, therefore, taxes

The ________ is the most widely traded currency in the world. A) pound B) yen C) euro D) U.S. dollar

The market for shares sold outside the boundaries of the issuing company's home country is the ________. A) Eurocurrency market B) international bond market C) international equity market D) Euroequity market

The perspective of ________ holds that as a company gains experience, resources, and confidence, it progressively increases its scope of countries to which it exports. A) serendipity B) export management C) the born-global theory D) incremental internationalization

The probability that a business is engaged in exporting tends to ________. A) decrease with the size of the firm B) increase with the product life cycle C) decrease with the product life cycle D) increase with the size of the firm

The stock market is also known as the ________. A) capital market B) foreign-exchange market C) bond market D) equity capital market

Thomas is planning a vacation to Country X. On a tourism Web site, he reads that the government of Country X limits the amount of money a tourist may convert into the country's currency. Country X most likely uses which of the following? A) import deposit requirements B) multiple exchange rates C) import licensing D) quantity controls

Tied aid requires a recipient to ________. A) donate a portion of the funds to the donor country's infrastructure needs B) use the capital in any way as long as donor country approval is granted C) employ local workers in management positions D) spend the funds in the donor country

Transfer pricing is a strategy that may be used by MNEs to ________. A) reduce consolidated corporate income taxes B) partially finance a subsidiary in another country C) transfer funds from a subsidiary to the parent corporation D) all of the above

Unlike the infant-industry argument, the industrialization argument for trade protection ________. A) requires independence from other countries B) stresses labor-intensive production methods despite high costs C) emphasizes use of locally available raw materials for manufacturing inputs D) presumes that economic growth will occur even if domestic manufactured prices are not globally competitive

What is the main motive for countries' protection of their film/cinema industries? A) to keep prices low for their citizens B) to improve their balance of payments C) to diversify their economies D) to preserve their national culture

What is the most likely reason that firms avoid aggressively seeking export opportunities? A) Exporting is an activity best left to large, resource-rich firms. B) Firms are unaware of opportunities in foreign markets. C) Foreign customers cannot easily communicate their needs. D) Firms are reluctant to adjust their established business practices.

What is typically the most difficult aspect of an export plan for SMEs? A) finding a freight forwarder B) identifying core competencies C) creating countertrade activities D) targeting the right foreign market

Which of the following BEST describes the concept of serendipity in exporting? A) modifying products to meet cultural preferences B) initiating global sales through e-commerce methods C) relying too much on exports when domestic sales suddenly increase D) opportunistically responding to unsolicited orders from foreign customers

Which of the following accurately identifies a difference between GATT and the WTO? A) GATT could enforce member compliance with agreements, but the WTO cannot. B) At its inception, GATT had more member nations than the WTO currently has. C) GATT withdrew the most-favored-nation clause, but the WTO reinstated it. D) GATT rules did not cover trade in services, but the rules of the WTO do.

Which of the following best describes arbitrage? A) using foreign exchange to fund new foreign direct investments B) purchasing foreign currency in anticipation of long-term trends C) using foreign-exchange instruments to speculate for profit D) purchasing foreign currency on one market for immediate resale on another market

Which of the following best explains why the experience of countries such as Taiwan and South Korea are used to support export-led development policies? A) their low inflation B) their increased FDI C) their industry diversity D) their rapid economic growth

Which of the following financing tactics would most likely help an MNE avoid bankruptcy? A) integrating e-commerce opportunities with domestic sales in order to maintain a steady balance of income and expenditures B) agreeing to forward contracts with customers and hedging purchases and sales on future currency rates C) organizing the capital structure so that the amount of debt financing is twice the level of equity financing D) keeping the percentage of debt in the capital structure to a level that can be managed even during difficult business conditions

Which of the following is NOT a reason a company would deal in foreign exchange? A) to pay or receive dividends in a foreign currency B) to speculate on possible future movements in a currency C) to buy and sell merchandise denominated in a foreign currency D) to import merchandise denominated in its currency rather than the currency of the exporter

Which of the following is NOT one of the top four locations for trading foreign exchange? A) London B) New York C) Tokyo D) Hong Kong

Which of the following is a difference between export management companies (EMCs) and export trading companies (ETCs)? A) ETCs deal with both exports and imports, while EMCs deal only with exports. B) ETCs are subject to antitrust laws, while EMCs are not. C) ETCs typically carry inventory, while EMCs typically do not. D) ETCs operate more on the basis of demand, while EMCs operate more on the basis of supply.

Which of the following is a problem with the infant-industry argument for protection? A) Most developed countries increasingly have a larger portion of retirees than youth. B) Consumer groups become very active in protesting the higher prices that result during infancy. C) Other countries retaliate by limiting exports of technology needed by the infant industry producers. D) If the industry does not lower costs sufficiently to be competitive, it becomes a formidable pressure group for continued protection.

Which of the following is an example of cryptocurrency? A) U.S. dollar B) Japanese yen C) Euro D) Bitcoin

Which of the following is the largest source of foreign-exchange income in Mexico? A) FDI B) tourism C) foreign aid D) remittance income

Which of the following is true of export trading companies in the United States? A) They are like independent distributors that match buyers with buyers. B) They are prohibited from working with a firm's competitors due to antitrust laws. C) They must be established independently of the company in order to avoid a conflict of interest. D) They have been a successful form of export intermediation in recent years.

Which of the following is used as an illustration of the PPP theory for estimating exchange rates? A) the Composition of Official Foreign Exchange Reserves (COFER) B) the black market rate C) the import licensing ratio D) the Big Mac Index

Which type of exchange rate arrangement is based on supply and demand? A) soft peg B) hard peg C) crawling D) floating

You are the manager of an SME in the United States, and your firm wants to begin exporting. Since you have never been involved with exporting, there are many compelling reasons that encourage contacting the ________ to obtain expert counseling on exporting. A) U.S. Treasury Department B) Small Business Administration C) Federal Credit Insurance Association D) U.S. Commerce Department

________ are among the fastest-growing economic activities in the world. A) Global manufacturing and supply-chain management B) Accounting and taxation C) Finance and human resources D) Exporting and importing

A currency that is pegged to another currency is usually changed on a supply-and-demand basis.

A major challenge faced by Western Union in transferring money between the United States and Mexico is that Mexican citizens trust the banks but do not trust Western Union due to its reliance on global banks.

A tariff is the price of a currency.

A tax credit is a credit on goods and services paid by one member of a corporate family to another.

According to 2010 surveys, the most frequently traded currency pair is the U.S. dollar and Japanese yen.

According to the purchasing power parity theory, a change in relative interest rates between two countries must cause a change in exchange rates.

According to the text, technological advances such as e-mail and VoIP have increased the appeal of international trade because it is now easy and inexpensive to manage customer needs and communicate with customers frequently.

Acquiring and allocating financial resources among the company's activities and projects is the responsibility of the financial marketing manager.

Although central banks are responsible for foreign-exchange policy, they have no power to intervene in exchange rate markets.

An American investing in a London-based company is an example of interest arbitrage.

An offer is the right but not the obligation to buy or sell foreign currency.

Another source of financing, in which an investor takes an ownership position in return for shares of stock in the company and the promises of capital gains, is called debt financing.

Central bank reserve assets are kept in three major forms: foreign-exchange reserves, silver, and gold.

Commercial banks look at foreign-exchange trading as a service extended primarily to important customers, not as a major business activity of its own.

Companies new to exporting most frequently suffer over-commitment by top management in taking on the initial difficulties and financial requirements of exporting.

Companies that have integrated their supply chains internationally tend to lobby their home governments for increased protectionist measures.

Countries typically establish export restrictions to encourage the development of substitute products.

Equity financing is the degree to which a firm funds the growth of a business by debt.

Export-led development refers to the off-shoring of production.

Fundamental forecasters assume that if current exchange rates reflect all facts in the market, then under similar circumstances, future rates will follow the same patterns.

Hong Kong is one of the top four largest markets in the world in foreign-exchange trades and the largest in Asia.

If the forward rate for a foreign currency is less than the spot rate, the foreign currency is selling at a forward premium.

Import trade controls, but not export trade controls, can be used as a weapon of foreign policy.

In most cases, trade protectionism makes it easier for a company to buy what it needs and to sell products in global markets

In what is known as direct exporting, the exporter sells goods directly to or through an independent domestic intermediary in the exporter's home country that then exports the products to foreign markets.

Major types of indirect intermediaries include export trading companies, distributors, and freight forwarding companies.

Most MNEs generate a majority of their revenues in their home regions.

Most foreign exchange is handled through voice brokers.

NGOs must be recognized by the United Nations in order to do humanitarian work in developing countries.

OPEC is an example of a producer's cartel that is successful because of its ability to institute tariffs on oil exports

OPEC is an example of a producer's cartel that is successful because of its ability to institute tariffs on oil exports.

On average, workers displaced by imports earn higher wages in the new jobs they accept

One reason that companies use the foreign-exchange market is to diversify their expenses from other sources.

Outright forward transactions involve the exchange of currency the second day after the date on which the two foreign-exchange traders agree to the transaction.

Production location is not an important choice when doing business in the European Union.

Regional integration is better known as global integration through the World Trade Organization.

Serendipity is often an export trigger for companies that purposefully look to internationalize their operations.

Smithson Pottery is considered a regular exporter because the firm fills unsolicited orders from foreign buyers and passively investigates international trade options.

Static effects are the overall growth in the market and the impact on a company caused by expanding production and by the company's ability to achieve greater economies of scale.

Taxation is an important cash flow issue, but it typically does not have a strong impact on the choice of organizational form (such as branch or subsidiary) or the location of an investment.

Technical forecasting relies on trends in economic variables to predict future exchange rates.

The Big Mac Index perfectly explains the relative size of economies.

The Japanese yen makes up the largest portion of the international bond market.

The OECD has set transfer pricing guidelines to enhance the manipulation of prices and therefore taxes for MNEs and the countries where they operate.

The Single European Act set steps to accomplish monetary union in the European Union, including the creation of the euro.

The U.S. dollar is so widely traded partially because the New York Stock Exchange is the biggest foreign-exchange center in the world.

The argument for using protectionism to bring about industrialization in developing countries presumes that gains will occur because the industry will become internationally competitive.

The bid is the price at which the trader is willing to sell foreign currency.

The comparable access argument for import restrictions is a more valid economic argument for products using small-scale technology than for products requiring substantial economies of scale to be competitive.

The essential-industry argument holds that industries with potential export capabilities should be protected.

The international bond market is much larger and more lucrative than the domestic bond market.

The introduction of the euro has eliminated currency as a barrier to trade in all European countries.

The major objective of the European Central Bank is to control taxes as a means of deficit spending

The most common type of tariff is the export tariff.

The most-favored-nation policy is a WTO privilege that allows member nations to restrict tariff cuts to members.

The shifting of trade to countries in a regional group at the expense of trade with countries not in the group is known as trade internalization.

The stages of development in a company's export expansion are tied to company size.

The three variables predicted by forecasting are the timing, magnitude, and length of exchange rate movements.

When free mobility of factors of production is added to a common market, the result is a customs union.

) An independently floating exchange rate is adjusted periodically at a fixed pronounced rate.

False

The IMF's primary role is to identify exchange rate regimes.

False

"Born global" firms are those that step straight onto the world stage, making exporting the primary goal of the firm from day one of operations.

A French company floating a bond issued in Swiss francs in Switzerland would be selling a foreign bond.

A company classified as a small and medium-sized enterprise (SME) has fewer than 500 employees.

A currency sells at a forward premium when the forward rate is greater than the spot rate.

A current account deficit suggests that a country is importing more than it is exporting and building up foreign debt.

A major pitfall of exporting is misclassifying products in terms of the destination country's tariff schedule, thereby incurring a higher tax or slower delivery.

A major problem with MNEs using offshore financial centers is that they may give unfair tax advantages to companies.

A transfer price is a price on goods and services sold by one member of a corporate family to another.

According to surveys, the most common concern regarding international trade is a shortage of working capital to finance exporting activities.

According to the Treaty of Maastricht, a euro applicant must have a total outstanding government debt that does not exceed 60% of its GDP.

Although the European Union is a common market, member countries have different economic growth rates.

An export trading company (ETC) works with many manufacturers rather than representing a single manufacturer.

Arbitrage is the purchase of foreign currency on one market for immediate resale on a foreign market in order to profit from a price discrepancy.

As companies expand internationally, they must change their organizational structure and operating strategies to take advantage of regional trading groups.

Export intensity, the percentage of total revenues coming from exports, is not always correlated with company size.

GATT's contribution to trade liberalization made possible the expansion of world trade in the second half of the twentieth century.

Helping a struggling domestic company through import restrictions frequently causes other countries to retaliate.

Import substitution is a program promoting local production of products that would otherwise be imported.

In a multiple exchange-rate system, the government determines which kinds of transactions are to be conducted at which exchange rate.

In an FX swap, one currency is swapped for another on one date and then swapped back on a future date.

In foreign-exchange markets, reporting dealers trade more foreign exchange with other reporting dealers than with any other category of users.

In the spot market, the spread is the difference between the bid and offer rates and is the trader's profit margin.

Infant-industry protection requires some segment of the economy to incur the higher costs when local production is inefficient.

Inflation in the United States would cause China's massive dollar reserves to lose value.

Low-cost Eurocurrency loans can be obtained in offshore financial centers.

Most MNEs generate a large portion of their revenues in their home regions.

One advantage of importing is that an importer can diversify its operating risks by developing alternative suppliers.

One of the reasons that neighboring countries tend to ally is similar consumer tastes.

Ownership advantages refer to a firm's specific assets, international experience, and the ability to develop either low-cost or highly differentiated products within the context of its particular value chain.

Pender Pet Products is considered an opportunistic importer because the firm seeks products around the world that it can import and sell profitably to domestic consumers.

Producers are affected by exchange rate changes because goods manufactured in a country with a weak currency will be relatively cheap in world markets.

Purchasing power parity (PPP) is a well-known theory that seeks to define relationships between currencies.

Subpart F income is passive and usually derived from operations in a tax-haven country.

The Big Mac Index suggests that exchange rates should leave Big Mac hamburgers costing the same in the United States as abroad.

The European Union is an example of regional integration.

The International Fisher Effect links interest rates and exchange rates.

The U.S. dollar is important as a vehicle for foreign-exchange transactions between two countries other than the United States.

The U.S. dollar is widely traded because it is a transaction currency in many international commodity markets.

The U.S. government has more than 10,000 tariff classifications and more than half of them are subject to interpretation.

The countries most likely to be successful at using trade retaliation are large trading countries.

The dominant currencies in the international bond market are the euro and the U.S. dollar

The foreign freight forwarder is the largest export intermediary in terms of value and weight of products managed.

The goal of a free trade agreement is to abolish all tariffs among member countries.

The infant-industry argument for trade protection holds that an industry needs government protection from imports until it becomes competitive enough in world markets.

The long-term financing dimension of financial management deals with the selection, issuance, and management of long-term debt and equity.

The major trade groups in South America are CAN and Mercosur.

The most important rationales for NAFTA are geographic proximity and trading importance.

The opportunity to increase profitability is the primary reason that firms decide to export.

The primary duty of the customs agency of a government is the assessment and collection of all duties, taxes, and fees on imported merchandise.

The primary objective of multinational tax planning is to minimize the firm's worldwide tax burden.

The principle by which the tax authorities allow firms to reduce their tax liability by the amount of income taxes paid to a foreign government is known as a tax credit.

The shifting of resources from inefficient to efficient companies as trade barriers fall produces static effects.

The term protectionism, when applied to international trade, refers to governmental restrictions and incentives to affect trade flows.

The three major responsibilities of the European Parliament are legislative power, control over the budget, and supervision of executive decisions

The typical tax-haven subsidiary owns the common stock of its related operating foreign subsidiaries.

Very few commodity agreements are successful in bringing together supplier and consumer countries to stabilize commodity prices.

When forecasting exchange rates, forecasters must predict the magnitude, timing, and direction of change in exchange rates.

countries create value by recovering and recycling scarce resources such as copper.

Dollarization of a currency occurs when a country takes all of its own currency out of circulation and replaces it with U.S. dollars.

True

The IMF uses the quota system to determine how much a country may borrow from the Fund.

True

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