Chapter 12

What are the components of the global expansion of the financial system?

A, B, and C above

What are the elements of international business?

All of the above

What is the largest single trade bloc in the world today?

European Union

All of the following are production factors, EXCEPT

Government regulations

Where does barter or countertrade occur today?

In traditional markets in underdeveloped countries.

In 1960, almost two-thirds of foreign direct investment by U.S. companies was in what country?

Canada

Who introduced the idea of comparative advantage?

David Ricardo

What is the view of people on the left of the political spectrum regarding the presence of multinationals in less developed countries?

Multinational firms are counterproductive to development.

What is the view of people on the right of the political spectrum regarding the presence of multinationals in less developed countries?

Multinational firms have a high potential to aid the development process in LDCs.

What must a country give up in order to be a member of the World Trade Organization?

Part of its sovereignty

What occurs when inflation exists?

Prices of goods and services rise

According to Michael Porter's Theory of Competitive Advantage, what factor most determines economic success?

Productivity growth

What is the primary reason for a firm to "go international" (i.e., engage in foreign direct investment)?

Profit

Which of the following countries regularly engages in countertrade?

Russia

What is the name used to describe firms that settle for less than the optimal?

Satisficers

All of the following pairings of country and economic activity are correct, EXCEPT

Spain: furs

What is the MOST important shortcoming of trade theories?

They fail to incorporate the role of firms, especially multi-national corporations.

Under David Ricardo's theory of comparative advantage, to what does each country allocate its resources?

To the good that it can produce most efficiently compared to its trading partners

All of the following are nontariff barriers to international trade, EXCEPT

a tax levied on an imported product

When the dollar appreciates in foreign-exchange markets relative to other currencies, it can

buy more goods and services from other countries.

Free trade is best from the standpoint of

efficiency.

World-systems theorists such as Wallerstein argue that an artificial division of labor has made earning a good income from free trade difficult for most

less developed countries (LDCs).

What was the objective of the eighth round of GATT in Uruguay?

All of the above

In 1999 major protests against the WTO were made famous by what phrase?

Battle in Seattle

Which country was instrumental in creating an unfair global division of labor?

Britain

Banks from what countries were the first to be established overseas?

Britain and France

Why is the United Kingdom America's chief foreign investor?

Cultural affinities and lack of language barriers

Which of the following is NOT a characteristic that corporations prefer to find in countries in which they invest?

Cultural nationalism

What is the difference between direct investment and portfolio investment?

Direct investment includes managerial control of a foreign company; portfolio investment does not.

What does FDI stand for?

Foreign Direct Investment

What was the cause of the slowdown in the economic growth rates of industrialized countries in the mid-to-late 1970s?

Increase in oil prices

Four of the following countries are referred to as the "Economic Tigers" of Asia. Which one is not one of the so-called Tigers?

India

By what name do we call the specialization of different countries within a global division of labor?

International integration

What country has had the largest proportional increase in its foreign direct investment in the U.S. over the last 20 years?

Japan

Foreign direct investment in the developing world has focused on all of the following countries, EXCEPT

Nigeria

What caused the increase in the competitive rivalry among industrialized countries in the late 20th Century?

Slower and unstable growth rates

Loans from the International Monetary Fund and the World Bank tend to uphold the basis of economic and foreign policy in what country?

United States

What country has become a popular destination for Foreign Direct Investment since 1970, primarily because of its power and stability economically and politically as well as for its relatively inexpensive currency in world markets?

United States

What country is the largest debtor nation in the World?

United States

What country leads the world in Foreign Direct Investment?

United States, but its share of the total is slipping

GATT (General Agreement on Tariffs and Trade) was the fore-runner of what international organization of today?

World Trade Organization (WTO)

What is the most inclusive transnational organization in the world?

World Trade Organization (WTO)

What happened to the level of world trade between 1980 and the present?

World trade jumped from $2 trillion to over $5 trillion.

Taken together, labor, capital, technology, entrepreneurship, and land containing raw materials are called

factors of production.

If the value of a currency fluctuates according to changes in supply and demand for the currency on the international market, the exchange rate is said to be

floating.

When international trade occurs between different affiliates of the same company, it is called

intramultinational trade.

There are four levels of regional economic integration. What is their order, from lowest to highest level of integration?

(1)Free trade area; (2)Customs union; (3)Common market; (4)Economic Union

What is the correct chronological order of changes that affected the world economy in the late twentieth century?

(1)Slowdown in economic growth rates in industrialized countries; (2)Competitive rivalry among industrialized countries increased significantly; (3)Global financial markets underwent a profound series of alterations; (4)Massive geopolitical realignments occurred.

When did the U.S. begin to experience a trade deficit?

1976

During what year was the U.S. trade deficit at its highest level (over $780 billion)?

2005