Final Exam: Business Global Dimension

_____ is used by international businesses and their banks to move out of one currency and into another for a limited period without incurring foreign exchange risk.

A currency swap

What is globalization?

A process in which the world economy becomes increasily interconnected through international trade and investment.

One factor that initiated the collapse of the fixed exchange rate system was

A worsening of U.S. foreign trade position

Which statement is true of Bretton Woods agreement?

All countries agreed to fix the value of their currency to gold under the agreement.

______ eliminates trade barriers between member nations, adopts a common external policy, and permits factors of production to move freely between member countries but it also requires a common currency, harmonization or members' tax rates, and a common monetary and fiscal policy.

An economic union

For firm selling a product that serves universal needs but not facing significant competition, _____ strategy makes sense.

An international

Throughout the world, the rationale for economic transformation can be attributed to the fact that ________ economies failed to delivered the sustained economic performance of _______ economies.

Command and mixed; market-based

An advantage of using the gold standard is that it

Contains a powerful mechanism for achieving balance-of-trade equilibrium.

The idea that business people should consider the social consequences of economic actions when making business decisions and that there should be a presumption in favor of decisions that have both good economic and social consequences is known as

Corporate social responsibility

Trade _____ occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.

Creation

A country's _____ accounts keep track of both as payments to its receipts from other countries

Current

Three Latin American countries enter into an agreement to remove all tariffs and trade barriers between them. They have adopted a common external trade policy as well. Which level of economic integration best describes this arrangement?

Customs Union

Which statement is true of the deregulations of the financial industry?

Deregulation helped the development of an international capital market.

When a country tries to hold the value of its currency within some range against an important reference currency such as the U.S. dollar without adopting a formal pegged rate, it is often referred to as a

Dirty float

Identify the INCORRECT statement about environmental regulations.

Environmental regulations are similar across developed and developing nations.

____ are normally under written by an international syndicates of Banks.

Eurobonds

Which statement is true of Eurocurrency?

Eurocurrency can be created anywhere in the world

The ____ outlawed the paying of bribes to foreign government official to gain business.

Foreign corrupt practices act

______ gives a firm a lot of control over its technological know-how, operations, and business strategy in a foreign country.

Foreign direct investment

The ______ predicts that countries will export those goods that make intensive use of factors that are locally abundant.

Heckscher-Ohlin theory

What change was made to the International Monetary Fund's Articles of Agreement in the Jamaica agreement?

IMF members were permitted to sell their gold reserves at the market price

How does a common law system differ from a civil law system?

In a common law system a judge has the power to interpret the law, while in a civil law system a judge has the power and not to apply the law.

A company wants to expand internationally and is weighing the pros and cons of various entry modes. What rationale would you use to show the advantage of exporting as a mode of entry?

It avoids the costs of establishing manufacturing operations in the host country.

When an Islamic bank lends money to a business

It takes a share in the profits that are derived from the investment.

And advantage of _____ with a local partner is the knowledge of the local environment that the local partner contributes to the venture.

Joint-ventures

Banks such as JPMorgan Chase and investment firms such as Charles Schwab are referred to as _____ in that they connect investors and borrowers, either directly or indirectly.

Market makers

Which situation would be present with economic integration under a common marker?

No restrictions on immigration or emigration resulting in free movement of labor and capital

A country has adopted neither a radical policy nor a free market policy, but rather one that posits that FDI Has both benefits and cost. This is best described as

Pragmatic nationalism

A consequence of subsidies is that they

Protect inefficient domestic producers

Four countries in south east Asia agrees to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods, services, and the factors of production among each other. What is this type of agreement called?

Regional economic integration

Nestor is the expatriate manager of his company's textile plant in Cambodia. He observes that the working conditions in the Cambodian facility are terrible, compared to the manufacturing plants in the United States. He also finds that wages are much lower in Cambodia. Nestor is bothered by this and insists that the facility in Cambodia follows the standards set forth in the United States. What approach to ethics is Razor Sharp Electronics using?

Righteous moralist

What is a disadvantage of the integrations of the international capital market facilitated by technology?

Shocks that occur in one financial center will spread globally

_______ are typically define on the basis of characteristics such as family background, occupation, and income

Social strata

Which statement is true of licensing?

The firm does not have to bear the development costs and risks associated with opening a foreign market.

The individualism versus collectivism dimensions of Hofstede's study explored

The relationship between the individual and his or her fellows

Systems that emphasize collectivism tend toward

Totalitarianism

Which argument strengthens the idea of floating exchange rates?

Trade deficits can be corrected through changes in exchange rates.

Which situation occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area?

Trade diversion

_______ occurs when a political party represents the interests of a particular tribe (and not always the majority tribe) monopolizes power.

Tribal totalitarianism

The Japanese government was just pressured by the U.S government to place limits on the number of vehicles exported to the United States by Japanese automobile producers in 1981. This is an example of

Voluntary export restraint

Tiana is a cultural relativist, which means she likely believes

a firm should adopt the ethics of the culture in which it is operating.

The deregulation of a command economy involves which step?

abolishing laws regulating the establishment and operation of private enterprises

___ are levied as a proportion of the value of the imported good.

ad valorem tariffs

A German car manufacturer purchases a U.S. producer of car tires. This is an example of

an acquisition

Globalization has resulted in

an increase in the use of outsourcing

The term political economy stresses that the political, economic, and legal system of a country

are interdependent; they interact and influence each other.

A multinational firm may need to delegate marketing functions to national subsidiaries of to

be responsive to local differences in distribution channels.

How is it that spot exchange rates are determined?

by the interaction between the demand and supply of one currency relative to other currencies

Tariffs do not benefit

consumers

Walmart makes bulk purchases from its vendors and as a result it is able to get better deals than its competitors. This allows Walmart to offer greater discounts to its customers. In this case, Walmart benefits from

economies of scale

Investing in ____ is an important determinant of economic development as it leads to higher growth rates and more productive population

education

The rate at which one currency is converted into another is known as the

exchange rate

A company has developed a new, innovative product. If it is quick to enter a new market, it will have the ability to preempt rivals and capture demand by establishing a strong brand name and customer satisfaction. In other words, this company will have captured

first-mover advantages

Early entrance to a market that are able to create switching costs that tie customers into their products or services are capitalizing on

first-mover advantages

_____ arises from volatile changes in exchange rates.

foreign exchange risk

Antonio is an artisan. The country he lives in allows him to sell his goods to people in other countries without any quotas or tariffs. Likewise he is free to buy materials he needs for his craft from other countries without any restrictions. The country in which Antonio lives practices

free trade

A major benefit of engaging in free trade is that it

gives countries access to products that they cannot produce.

According to the strategic trade policy argument

government support can help domestic firms overcome the first-mover advantages enjoyed by foreign competitors.

The cost of capital is

higher in a purely domestic capital market than in a global market

In a(n) ______ society, The welfare of society is best served by letting people pursue their own economic self-interest

individualist

In many countries, political considerations make ____ the only feasible entry mode.

joint ventures

Pressures for _____ imply that it may not be possible for a firm to realize the full benefits from economies of scale, learning effects, and location economies.

local responsiveness

_______ strategy is most appropriate when there are substantial differences across nations with regard to consumer tastes and preferences, and where cost pressures are not too intense.

localization

The volume of world merchandise trade and production is growing faster than world GDP. This implies that

more firms are dispersing their production processes to global locations.

The Eurocurrency market is attractive to both depositors and borrowers because

of its lack of government regulation.

The currency of Lebanon is fixed relative to the U.S. dollar. This means that the exchange rate between the Lebanese pound and other currencies is determined by the dollar exchange rate. This reflects a

pegged exchange rate

In a _______, the state owns all means of production

planned economy

The theory of comparative advantage suggests that trade is a _______ game in which all countries that participate realize economic gains.

positive-sum

GNI per capita can be adjusted by ______ to account for differences in the cost of living.

purchasing power

Containerization has revolutionized the transportation business by

simplifying the transportation process and lowering the cost of shipping goods.

Which term refers to the extent to which individuals can move out of the strata into which they are born?

social mobility

Currency ________ typically involves the short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates.

speculation

Milo is traveling to Ireland on vacation. When he arrives, he goes to a bank to convert his U.S. dollars into the local currency—the euro. What exchange rate will be used to handle this transaction?

spot exchange rate

The relative decline of the United States in the share of world output and world exports reflects

the growth in the economic development of emerging markets and other industrialized countries.

Which situation arises when a country is importing more goods and services than it is exporting

trade deficit

A firm that is facing both strong cost pressures and strong pressures for local responsiveness should follow a _____ strategy.

transnational

Martina worried a lot about her job, which she chose specifically because it was very structured with clear rules and regulations. She carefully planned her career to maximize job security and retirement benefits. Martina would rate high on which of Hofstede's four dimensions?

uncertainty avoidance

Commodity products such as bulk chemicals, Petroleum, steel, and/or sugar do not require much differentiation because the taste and preference for these products are similar all around the world. These products are called

universal needs

Firms entering a market via a _____ must bear all the costs and risks associated with the venture.

wholly owned subsidiary