econ 236 final
American labor unions have recently maintained that U.S. multinational enterprises have been: a. Exporting American jobs by investing overseas b. Exporting American jobs by keeping investment in the United States c. Importing cheap foreign workers by shifting U.S. investment overseas d. Importing cheap foreign workers by keeping U.S. investment at home
A
Direct foreign investment has taken all of the following forms except: a. Investors buying bonds of an existing firm overseas b. The creation of a wholly owned business enterprise overseas c. The takeover of an existing company overseas d. The construction of a manufacturing plant overseas
A
Over time, a depreciation in the value of a nation's currency in the foreign exchange market will result in: a. Exports rising and imports falling b. Imports rising and exports falling c. Both imports and exports rising d. Both imports and exports falling
A
Suppose that an American automobile manufacturer establishes foreign subsidiaries to market the automobiles.This practice is referred to as: a. Forward vertical integration b. Forward conglomerate integration c. Backward vertical integration d. Backward conglomerate integration
A
Which of the following is classified as a credit in the U.S. balance of payments? a. U.S. exports b. U.S. gifts to other countries c. A flow of gold out of the U.S. d. Foreign loans made by U.S. companies
A
Which of the following is considered a capital inflow? a. A sale of U.S. financial assets to a foreign buyer b. A loan from a U.S. bank to a foreign borrower c. A purchase of foreign financial assets by a U.S. buyer d. A U.S. citizen's repayment of a loan from a foreign bank
A
A depreciation of the dollar refers to: a. A fall in the dollar price of foreign currency b. An increase in the dollar price of foreign currency c. A loss of foreign-exchange reserves for the U.S. q d. An intervention in the international money market
B
During the 1970s, American oil companies acquired nonenergy companies (e.g., copper, auto components) in response to anticipated decreases in investment opportunities in oil. This type of diversification is referred to as: a. Horizontal integration b. Conglomerate integration c. Forward vertical integration d. Backward vertical integration
B
Most foreign exchange trading occurs between banks and: a. National governments b. Other banks c. Corporations d. Household investors
B
Suppose the exchange rate between the Japanese yen and the U.S. dollar is 100 yen per dollar. A Japanese stereo with a price of 60,000 yen will cost: a. $60 b. $600 c. $6000 d. None of the above
B
Which of the following tends to cause the U.S. dollar to appreciate in value? a. An increase in U.S. prices above foreign prices b. Rapid economic growth in foreign countries c. A fall in U.S. interest rates below foreign levels d. An increase in the level of U.S. income
B
An effort to diversify into non related markets is most likely to be undertaken when firms undergo: a. Horizontal integration b. Vertical integration c. Conglomerate integration d. None of the above
C
Both Coca-Cola Co. and Pepsi-Cola Co. are multinational firms in that their soft drinks are bottled throughout theworld. This practice illustrates: a. Backward vertical integration b. Forward vertical integration c. Horizontal integration d. Conglomerate integration
C
The exchange rate is kept the same in all parts of the market by: a. Forward cover b. Hedging c. Exchange speculation d. Exchange arbitrage
D
Under a system of floating exchange rates, the Swiss franc would depreciate in value if which of the following occurs? a. Price inflation in France b. An increase in U.S. real income c. A decrease in the Swiss money supply d. Falling interest rates in Switzerland
D
As the dollar depreciates against the peso, U.S. residents tend to import more Mexican goods and thus demand more pesos.
False
Because the balance of payments utilizes double-entry accounting, merchandise exports will always be in balance with merchandise imports.
False
Due to transfer-pricing problems, multinational corporations must shift profits away from countries with low corporate tax rates to high tax-rate countries, thus absorbing a larger tax bite.
False
If a country realizes a current-account deficit in its balance of payments, it becomes a net supplier of funds to the rest of the world.
False
The United States has discouraged the "brain drain" problem by permitting the immigration of unskilled workers while restricting the immigration of skilled persons.
False
There is virtually universal agreement among economists that foreign direct investment in the United States has reduced the economic welfare of the average U.S. citizen.
False
Arbitrage results in a riskless profit since a trader purchases a currency at a low price and simultaneously resells it at a higher price.
True
Because the balance of payments is a record of the economic transactions of a country over a period of time, it is a "flow" concept.
True
Concerning the balance of payments, a current-account deficit results in a worsening of a country's net foreign investment position.
True
Foreign direct investment would occur if Mobile Inc. of the United States acquired sufficient common stock in a foreign oil company to assume voting control.
True
Horizontal integration would occur if General Motors sets up a subsidiary in Mexico to produce automobiles identical to those that it produces in the United States.
True
In the forward market, the exchange rate is agreed on at the time of the currency contract, but payment is not made until the future delivery of the currency actually takes place.
True
Multinational corporations often locate manufacturing operations abroad in order to take advantage of foreign resource endowments or wage scales.
True
On the U.S. balance-of-payments statement, a capital inflow would occur if a Swiss resident purchases the securities of the U.S. government.
True
Vertical integration occurs if a parent multinational corporation establishes foreign subsidiaries to produce intermediate goods or inputs that go into the production of a finished good.
True
