Global Environment of Business _Exam 2
In December 2007, the members of the EU signed __________, which increases the power of the European Parliament. A. The Treaty of Lisbon B. London Accords C. The Treaty of Rome D. The Maastricht Treaty
A. The Treaty of Lisbon
Fundamental analysis draws one __________ Siri for predictions: A. exchange B. economic C. market D. multivariate
B. economic
A tactic or strategy a firm should use minimize its foreign exchange exposure is: A. focusing on transaction in translation exposure, while leaving concerned about economic concerns to the government and central banks responsible for managing Tommy's. B. recognizing neck forecasting models are generally and profit and avoiding making decisions based on potential he ****ing models. C. producing monthly for an exposure report. D. do you centerline is in control of exposure to take advantage of local conditions and be able to respond quickly.
C. producing monthly for an exposure report.
__________ of FDI to the __________ country included in the impact of balance of payments from inward flows of foreign earnings, the impact of employment effects with increased demand for products and learning new skills from exposure to foreign markets. A. Costs; home B. Benefits; host C. Costs; host D. Benefits; home
D. Benefits; home
Which of the following is NOT true about dumping in: A. Dumping may be the result of predatory behavior. B. Dumping may be defined as selling goods below their cost of production C. Dumping may be defined as selling goods below the fair market value D. Dumping may be used to build hidden inventories in foreign countries.
D. Dumping may be used to build hidden inventories in foreign countries.
Which of the following is NOT one of the three main categories of foreign exchange risk? A. Translation exposure B. Economic exposure C. Transaction exposure D. Forward rate exposure
D. Forward rate exposure
Which of the following is NOT one of the ways trade barriers constrain a firm's strategy? A. Trade barriers raise costs of exporting products B. Quotas may limit a firm's ability to serve a country from locations outside that country C. A firm may have to locate more activities to a country due to local content regulations D. Quotas and trade barriers are temporary in nature and make strategic planning difficult
D. Quotas and trade barriers are temporary in nature and make strategic planning difficult
___________ has (have) two basic elements: helping the countries domestic firms to gain first mover gains and helping domestic firms to find entry into a market. A. The Helms-Burton Act B. Free Trade policy C. Economies of scale D. Strategic trade policy
D. Strategic trade policy
Which level of economic integration is the least integrated? A. a political union B. common market C. regional trade system D. a free trade area
D. a free trade area
From the perspective of a firm negotiating the terms of an investment with a host government, the firms bargaining power is _________ when the host government values what the firm has to offer, the number of alternatives for the firm is greater in the firm has a long time to complete the negotiations. A. offset by potential diplomatic relations between countries B. low C. enhanced by regulations in the host government as a member of the WTO D. high
D. high
Regional free trade blocs in Africa are developing rapidly by putting aside differences between countries and focusing on models of other free trade areas. True or False
False
Subsidies, which include cash grants, low-interest loans, tax breaks and government equity participation, are made to firms exporting into the country. True or False
False
Hedging is when a firm insures itself against adverse consequences from unpredicted changes in future exchange rate changes. True or False
True
Turkey his lobbied to join the European Union, but membership has been denied because of a number of concerns. Which of the following is not one of the main concerns? A. Turkey is considered to have one foot in Asia. B. Turkey has never participated in a customs union before. C. There are humans rights concerns over treatment of the Kurds D. Turkey is primarily a Muslim nation
B. Turkey has never participated in a customs union before.
FDI as a substitute for imports or goods and services does one of the following: A. supports sagging export returned when investment costs build. B. improves the current account of the host country's balance of payments. C. reduces the need to finance a current account in arrears D. Support setting export returns when investment costs build
B. improves the current account of the host country's balance of payments.
One of the threats to the EU and NAFTA is most likely from: A. none of the above B. increased price competition C. emerging price embargo D. rising regional tariffs
B. increased price competition
A tariff rate quoted is: A. lowered exports within a quota B. lower to imports with in a quota C. higher exports within a quota D. higher imports within a quota
B. lower to imports with in a quota
The term __________ refers to the FDI undertaken to serve the market. A. inflows of FDI B. offshore production C. captive industries D. outsourcing
B. offshore production
The ultimate authority in the EU is: A. European Parliament B. the Council of the European Union C. the United European Nations D. the Union of European members
B. the Council of the European Union
PPP feels in part because it assumes away __________: A. none of the above B. transportation course and trade barriers C. equalization of prices by arbitrage D. inflationary cost push-prices
B. transportation course and trade barriers
Trade diversion is an outcome which one of these: A. when high cost domestic producers are replaced by low cost producers B. when lower-cost external suppliers are replaced by higher cost free trade area suppliers C. when free trade suppliers are replaced by producers D. when low-cost external suppliers are replaced by higher cost free trade area suppliers
B. when lower-cost external suppliers are replaced by higher cost free trade area suppliers
The countries of Western Europe gained incentive to cooperate and form the EC from all of these except: A. the belief that European national-states we're no longer large enough to hold their own in the world markets and politics B. the aggressive policies of Joseph Stalin C. All of the above were incentives D. the desire to make another war in Europe unthinkable
C. All of the above were incentives
Which of the following is NOT true about the bandwagon affect? A. The effect can be caused by a single individual if the financial markets follow his or her lead. B. The effect can be hard to predict. C. The effect is of great interest to those who study investor psychology, but it has a minimal effect on the actual currency markets. D. The effect can be triggered by politicians.
C. The effect is of great interest to those who study investor psychology, but it has a minimal effect on the actual currency markets.
The TRIPS Agreement obligate WTO members to: A. police truck trafficking B. monitor currency trading C. enforce registered patents D. report violated licenses
C. enforce registered patents
The __________ of FCI refers to the demand of FD I undertaking over a given time (generally a year) and the __________ of FDI refers to the total accumulated value of foreign-owned assets at a given time. A. stock; flow B. annual amount, total value C. flow, stock D. outflow; inflow
C. flow, stock
When foreign imports flood a domestic market intending to capture customers or hurt local firms, most government will: A. declare war B. begin boosting exports C. impose countervailing duties D. seize foreign goods
C. impose countervailing duties
In 1992 to Uruguay round of GATT sought to protect the __________ of advanced nations: A. coal subsides B. cattle industries C. intellectual property D. nuclear technology
C. intellectual property
Countertrade issues to overcome the __________ problem. A. indexing B. counterfeit C. non convertibility D. dumping
C. non convertibility
What is not one of the benefits of the euro to all it's partners: A. increasing competition B. comparative pricing C. optimal currency area D. lower foreign exchange and hedging
C. optimal currency area
Although the WTO and the GATT have made great strides in reducing Clear Creek or non-agricultural products A. tariffs on industrial goods are higher than on services B. the WTO would like to increase the use of high tariffs as long as the use is truely selective C. the WTO would like to bring down to tariff rates on imports of non-agricultural goods into developing nations D. the ultimate goal is to stabilize tariff rates at about 4%
C. the WTO would like to bring down to tariff rates on imports of non-agricultural goods into developing nations
Translation exposure refers to __________ on the reported financial statements of a company: A. changes on Poinciana holder holdings B. changes in porn accounting procedures C. the impact of changes in currency exchange rates D. problems and doing business in more than one language, especially naming accounts
C. the impact of changes in currency exchange rates
When two or more Interprises run into each other in different regional markets, national markets, industries, this is called __________ . A. oligopolic competition B. factor-based competition C. an externality D. multipoint competition
D. multipoint competition
The contents of NAFTA are all of the following except: A. abolition by 2004 of tariffs on 99% of the goods traded between Mexico, Canada and the United States B. protection of intellectual property rights C. application of national environmental standards D. open public procurements to non-national suppliers
D. open public procurements to non-national suppliers
A foreign exchange market is a market for converting goods or services for their equivalent value across countries in order to do business. True or False
False
A key breakthrough at the WTO has been the substantial and long-overdue reduction of agricultural subsidies in the developed world. True or False
False
Administrative policies are business practices aimed at influencing governments to adhere to fear or free trade policies. True or False
False
Because of the strong economic and political arguments in support of it, integration has been easy to achieve and sustain. True or False
False
Currency swap is another term for the spot exchange rate since it is often used by travelers and tourists who change only small amounts of currency. True or False
False
Economist referred to knowledge spillovers is intellectual property, and their is a well-establish theory suggesting that firms can benefit by locating close to the source of the spillovers. True or False
False
Licensing is an especially good option for three kinds of industries: hi-tech industries with firm specific expertise, global oligopolies in competitive situations, and industries with intense cost pressures. True or False
False
More more laws and regulations are creating favorable situation for foreign direct investment throughout the world. True or False
False
Pragmatic nationalism takes the free market view towards FDI. True or False
False
The All European Act has a significant impact on the European Union economy because it requires restructuring the entire finance community . True or False
False
The Free Trade Area of the Americas (FTAA) has made significant progress due to the unusual cooperation and leadership between Venezuela and the United States. True or False
False
The foreign exchange market is headquartered in London with branches linking New York, Chicago, San Francisco, Hong Kong, Tokyo, Singapore, Sydney, Paris, Berlin, and Rome after its formation in the 1950s. True or False
False
The infant industry argument is a recent defense used by many developing countries to seek concessions for a more powerful, advance nations which otherwise would destroy local businesses unable to fend for themselves in today's global market. True or False
False
The political union is the most popular level of economic integration, do partially to it's attractive cost savings and reduced bureaucracy. True or False
False
A local content requirement demands that some specific fraction of a good be produced to domestically, either in value terms or in physical terms as a set percentage. True or False
True
A multinational enterprise is any company that is engaged in FDI. True or False
True
An increase in technology and a decrease in trade barriers is causing international trade to increase. True or False
True
Arbitrage is the purchase of securities in one market for immediate resale in another market to profit from a price discrepancy. True or False
True
Asia-Pacific Economic Corporation is an economic powerhouse with more than half world's total GNP, nearly half of the world trade and much of the growth in the world economy. True or False
True
Because of their pivotal role in international trade, firms can and do you exert a strong influence on government policy toward trade. True or False
True
Both leading and lagging strategies involve accelerating payments from weak-currency too strong-countries and delaying inflows from strong-countries to weak-currency countries. True or False
True
Currency speculation is another property of foreign exchange markets involving short-term movement of funds between trading currencies to profit from exchange rate shifts. True or False
True
During the 1980s and early 1990s, the world trade system erected under GATT came under pressure with calls for increased protectionism due to Japan's growing success and increasing trade deficits in the United States. True or False
True
F.T. Knickerbocker created a theory of oligopolistic firm behaviors whereby the major players are interdependent on one another to enhance mutual success at competitors' expense. True or False
True
Foreign direct investment takes place when a firm directly invests cash or physical facilities to produce or market a product in a country outside of it's home market. True or False
True
If it currently is not freely convertible, it will be either externally convertible or nonconvertible depending on whether nonresident can convert the country's currency to that of another nation. True or False
True
Internalization theory__or the market imperfections approach seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets. True or False
True
Licensing is access to a headquartered company's competitive advantages in management, product or service lines, and capabilities in exchange for premium and/or market presence. True or False
True
MERCOSUR began as a free trade pact among South American countries in 1988 but hit a significant road block ren years later due to recession and slumping intrabloc trade. True or False
True
Multilateral trade agreements are typically administered and handled by the WTO. True or False
True
One of the functions of the foreign exchange market is to provide some insurance against adverse consequences of unpredictable fluctuations in exchange rates. True or False
True
Regional economic integration represents geographic and economic market consolidation among member states similar to oligopolistic or cartel combines among business entities for exactly the same reasons to control foreign competition in advance local member interests. True or False
True
Strategic trade policy can create problems by creating a beggar-thy-neighbor policy focusing on special interest groups. True or False
True
The "Big Mac" index is a barometer of the PPP theorem which holds that the price of the same goods in one country is precisely identical in another country. True or False
True
The United States has been the largest source of FD I from immediately after WWII until present day. True or False
True
The modern trading system is based on the World Trade Organization, the successor to the General Agreement on Trade and Tariffs True or False
True
Though it now has only four remaining members, the European free trade association (EFTA) is the most enduring free-trade area in the world. True or False
True
US firms that do not have subsidiaries in Europe would be well advised to open them to avoid being shut out of the EU by no tariff barriers. True or False
True
When the WTO met in Seattle during 1999, frictions increased between the US and the EU over agricultural quotas, and riots broke out over environmental and trade issues. The resulting collapse of these talks moved the WTO from the domain of economists into the public square. True or False
True
Which of the following is not one of the political arguments for government intervention in international trade? A. Protecting Johnson industries B. Balancing the federal government budget with increased heroes C. Retaliating against other government trade policies D. Protecting consumers
B. Balancing the federal government budget with increased heroes
Which of the following is not a reason why firms would prefer a merger or acquisition instead of a greenfield investment? A. Foreign firms to be acquired have valuable strategic assets like brand loyalties and intelectual properties B. Greenfield investment can be environmentally challenging C. Mergers and acquisitions are quicker to execute D. Acquiring firms believe they can increase efficiency of the acquired unit
B. Greenfield investment can be environmentally challenging
The __________ states that in competitive markets, free of transportation costs and trade barriers, identical products sold in different countries must sell for the same price when your price is expressed in terms of the same currency. A. Law of One Price B. Bandwagon effect C. International Fisher Affect D. World Trade Organization regulation on pricing
A. Law of One Price
The extra profit producers make when supply is artificially limited by quota is called: A. a quota rent B. a market tax C. a tariff waiver D. a reduction
A. a quota rent
Location-specific advantages are __________ from a particular foreign location to combine with a firm's own unique assets: A. advantages arising out of resource endowments B. advantages arising out of local market opportunities C. advantages arising out of investment outlays D. advantages arising out of government support
A. advantages arising out of resource endowments
The spot exchange rate: A. can change on a minute by minute basis. B. is most frequently used by businesses because of the relative certainty determining the rates C. is set by dealers and is unaffected by shifts in supply and demand D. is determined by the central banks
A. can change on a minute by minute basis.
The Fisher Effect affects _________: A. nominal interest rate and inflation trends B. why nations experience decline in value on the currencies C. optimal currency zones D. price equilibrium for in elasticity of demand
A. nominal interest rate and inflation trends
Six nations of the Association of Southeast Asian Nations have recently agreed to the ASEAN Free Trade Area (AFTA) which has already: A. reduce tariffs or manufactured in agricultural products for less than 5% B. become an outspoken advocate against sweat shops and other labor abuses C. begun negotiations to establish a political union D. aggressively addressed intellectual property issues to ease trade conflicts
A. reduce tariffs or manufactured in agricultural products for less than 5%
Ownership restraints and performance requirements are two common controls host countries use to: A. restrict inward FDI B. restrict outward FDI C. encourage inward FDI D. encourage outward FDI
A. restrict inward FDI
The shift to a service-based economy is driven by several factors; which of these is NOT one of them? A. shift away from liberalization B. shift away from value creation C. shift away from production to consumption D. shift away from marketing
A. shift away from liberalization
