MAN 4600 Exam 3

A weakness of the Bretton Woods system was that it could not work if

the U.S. dollar was under speculative attack.

Freeman Fabricators International purchased securities on the London Stock Exchange and then immediately resold them on the New York Stock Exchange at a higher price. The profits from this transaction were used to buy new equipment for the company. This company engaged in

arbitrage.

As the human resource director, Geoff provides each manager with a breakdown of the metrics for employee performance measurement. He asks them to evaluate their staff against the standards provided in these metrics. Geoff is providing the managers with a(n) __________ device.

control

Which situation would require a business to allow for customization in its product because of an infrastructure difference in a foreign nation?

difference in consumer electrical systems across continents

The reductions in unit cost achieved by producing a large volume of a product are called

economies of scale.

A(n) __________ market is one in which prices reflect all available public information.

efficient

The exchange rate for converting the U.S. dollar into other currencies is continuously adjusted depending on the laws of supply and demand. This illustrates a __________ exchange rate.

floating

Advocates of the floating rate system argue that

floating rates help adjust trade imbalances

In the semiconductor industry, there are strong pressures for cost reductions, while demands for local responsiveness are minimal. As a result, Intel Corporation, which operates in this industry, focuses on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies. According to this information, which strategy is Intel pursuing?

global standardization

As an investor studying the gold standard, Kareem knows that he would need more than 1,500 euros to purchase one ounce of gold. These euros represent the

gold par value

Shreya is the chief financial officer for Home Safe Security Inc. Her company is interested in investing in a facility in Indonesia, but she is worried about unpredictable fluctuations in future exchange rates, which could cost her company millions of dollars. One way to ensure against this exchange risk is for Shreya to use

hedging.

The World Bank's initial mission was to

help finance the building of Europe's economy by providing low-interest loans.

A country in a state of fundamental disequilibrium suffers from

permanent adverse shifts in the demand for their products.

The rate at which a foreign exchange dealer converts one currency into another currency on a particular day is the

spot exchange rate.

Which strategy should firms pursue when they are trying to simultaneously achieve low costs through location economies, economies of scale, and learning effects; differentiate their product offering across geographic markets to account for local differences; and foster a multidirectional flow of skills between different subsidiaries in the firm's global network of operations?

transnational

According to the __________, there is a strong relationship between inflation rates and interest rates.

Fisher effect

Hudson Oil and Gas Inc., based in Houston, has a plant in Norway that builds cargo ships used to transport the company's products around the world. Each year this plant has been profitable, but Hudson Inc. is not able to convert the profits into U.S. dollars and take them out of the country. What type of convertibility does this represent?

nonconvertible

__________ occurs when two parties agree to exchange currency and execute the deal at some specific date in the future

A forward exchange

A(n) __________ refers to the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.

Currency Swap

The Bretton Woods agreement created which two multinational institutions?

International Monetary Fund and the World Bank

When companies behave recklessly because they know they will be saved by a government bail-out if things go wrong, it is called a

moral hazard.

Which scenario demonstrates the concept of opportunism in a strategic alliance?

Swenson Group wanted to make a strategic alliance with Miller Corp. in order to steal technology so it could become a front-runner in the industry.

What happened to the dollar following the announcement by the Group of Five that it would be desirable for most major currencies to appreciate via the U.S. dollar?

The dollar continued to decline.

Assume that the exchange rate between the U.S. dollar and the Japanese yen is $1 = ¥150. A pair of shoes that retail for $100 in New York should sell for ¥15,000 in Tokyo, if there are no trade barriers and transportation costs, according to the

law of one price.

When Shaleen first started at the manufacturing facility, it took her four hours to complete the task she can now accomplish in 30 minutes. In her first two months on the job, she not only learned to do her job more efficiently, but she has also saved the company money. This is an example of

learning effects.

Good Grains Bread Corp. plans to increase profits by providing custom bread baking mixes to the various countries where it sells. The company wants to match the tastes and preferences of the consumer in each of these markets. What type of strategy is Good Grains Bread Corp. using?

localization

Thirsty Skin Corporation is seeking to lower the costs of value creation and achieve a low-cost position in the skincare marketplace. As a result, it plans to move its manufacturing plant from the United States to South America, which is the optimal location for production. This strategic move will most likely allow the company to realize

location economies.

Cooperative agreements between potential or actual competitors are called

strategic alliances.

Under the fixed exchange rate regime established at Bretton Woods, __________ served as the reference point for all other currencies.

the U.S. dollar

The movement of traders like a herd, all in the same direction and at the same time, in response to each other's perceived actions, is called

the bandwagon effect.