Global Business Chapter 7

Which of the following is not true regarding the Atlas conversion factor? A. It was developed to reduce the impact of inflation-based changes on GNI estimates. B. It is the arithmetic average of the current exchange rate and the exchange rates in the two preceding years, adjusted by the ratio of domestic inflation to the combined inflation rates of the euro zone, Japan, the United Kingdom, and the United States. C. Incomes measured by the Atlas conversion factor are generally more stable over time. D. Changes in income rankings are more likely to be due to relative economic performance than to fluctuations in the exchange rate. E. Dissatisfaction with both the PPP and conversions using official exchange rates caused the World Bank to adopt the Atlas methodology to derive per capita GNI estimates.

A. It was developed to reduce the impact of inflation-based changes on GNI estimates.

From comparisons of income distribution studies over time, it generally appears that A. income is more evenly distributed in the richer nations. B. there are few variations in income distribution among developed and developing nations. C. comparisons over time demonstrate that income redistribution changes relatively quickly, so older data have limited value. D. the middle quintiles in most nations are growing at the expense of the bottom 20 percent. E. income inequality decreases in the early stages of development and reverses in the later stages.

A. income is more evenly distributed in the richer nations.

Where GNI increases faster than the population A. there probably is an expanding market. B. the market is probably contracting. C. the country where this occurs may be subject to political unrest. D. the market is becoming less attractive for business. E. there is probably a surplus of technical and university graduates.

A. there probably is an expanding market.

Dissatisfaction with both the purchasing power parity (PPP) and conversions using official exchange rates caused the World Bank to adopt what methodology to derive per capita GNI estimates? A. Gini coefficients. B. Atlas conversion factors. C. The inflation-growth coefficient. D. The Zurich formula. E. The Human Development Index.

B. Atlas conversion factors

The Human Development Index is based on what three essential elements of human life? A. A long and healthy life, the ability to acquire quality medical care, and access to resources needed for a decent standard of living. B. Access to affordable education, the ability to acquire quality medical care, and access to resources needed for a decent standard of living. C. A long and healthy life, the ability to acquire knowledge, and access to resources needed for a decent standard of living. D. A long and healthy life, the ability to acquire knowledge, and affordable rates of taxation. E. A limited level of government restrictions over its people, strong adherence to principles of free trade, and equal access to education and health care.

C. A long and healthy life, the ability to acquire knowledge, and access to resources needed for a decent standard of living.

Examples of socioeconomic data are A. GNI, GNI/capita, income distribution. B. total population, population density, and population distribution. C. GNI/capita, total population, and population distribution. D. total population, income distribution, and population density. E. GNI growth rates, GNI income/capita, and income distribution.

C. GNI/capita, total population, and population distribution.

Which of the following is true regarding the Big Mac Index? A. It is an index calculated by McDonald's to determine if their Big Mac sandwiches are properly priced within international markets. B. It calculates a per capita level of Big Macs that are sold in various countries of the world. C. It can indicate whether a particular currency is undervalued. D. It compares the value of a Big Mac to other items in a basket of goods economists traditionally use for economic analyses. E. It provides the empirical foundation for a trickle-down theory of economics called Burgernomics.

C. It can indicate whether a particular currency is undervalued.

Because ____________ consumer expenditures eliminate differences in relative prices, marketers use these data to analyze how the composition of consumption changes with the level of development. A. normalized B. inflation-free C. PPP-based D. historical-cost E. growth adjusted

C. PPP-based

According to the text, relative changes in wage rates among nations may cause the multinational firm to A. choose new exchange rates. B. reduce the number of workers. C. change its sources of supply from one country to another. D. install labor-saving machinery. E. eliminate product lines.

C. change its sources of supply from one country to another.

According to the text, a large international debt may cause a government to A. remove wage controls. B. increase government spending. C. impose price controls. D. reduce debt payments. E. print more money.

C. impose price controls.

A measure of how a nation's income is apportioned among its people is A. gross national income. B. gross domestic product. C. income distribution. D. the Atlas conversion factor. E. purchasing power parity.

C. income distribution.

GNI/capita, a crude estimate of purchasing power, must be further refined by A. an examination of the amount of income tax paid. B. a census to determine the total population. C. incorporating data on how the national income is actually distributed. D. determining the amount of discretionary income. E. calculating the amount of tax avoidance by individuals and corporations.

C. incorporating data on how the national income is actually distributed.

If a nation's GNI is small, but a small percentage of its population receives a large percentage of that income A. it may be a good market for high-priced industrial products. B. it may be a good market for high-volume, high-priced consumer products. C. it may be a good market for low-volume, high-priced luxury products. D. it is unlikely to be a promising market. E. then there will be good growth in the future.

C. it may be a good market for low-volume, high-priced luxury products.

Unit labor costs will not rise in unison with wage rates if A. the governments institute wage and price controls. B. productivity decreases faster than wages increase. C. the gains in productivity are greater than wage increases. D. interest rates rise less than wage rates. E. advertising costs decline.

C. the gains in productivity are greater than wage increases.

According to the text, an examination of the world's population and predictions for future populations suggests the following: A. The population of developing countries is nearly half of the world's total population. B. The 10 nations predicted to have the largest populations by the year 2050 are all developing countries. C. Because of low birth rates, developed nations will have a decreased demand for tourism and furniture. D. Because of low birth rates, developed nations will have an increased demand for financial services. E. The nation projected to have the largest population in 2050 is China.

D. Because of low birth rates, developed nations will have an increased demand for financial services.

According to the text, commercial energy use per capita is related to the size of which of the following sets of modern sectors? A. Commercial buildings, agriculture, transportation B. Housing, agriculture, industry C. Manufacturing, agriculture, housing D. Urban areas, industry, motorized transport E. Government, agriculture, industry

D. Urban areas, industry, motorized transport

Most developed nations share the following characteristic(s): A. disguised unemployment or underemployment. B. access to health care and a wide range of health problems. C. vigorous international trade, especially in agriculture and manufacturing. D. a large base of productive capital. E. plentiful educational opportunities and illiteracy.

D. a large base of productive capital.

The after-tax personal income of consumers is known as A. personal savings. B. discretionary income. C. personal income. D. disposable income. E. free cash flow.

D. disposable income.

Economies with per capita incomes in the low to middle range that are in a transition toward developed status are known as A. undeveloped economies. B. socialist economies. C. high-income economies. D. emerging market economies. E. less-developed economies.

D. emerging market economies

As a general rule, the underground economy in a country will be bigger when A. tax rates are lower. B. drug use is higher. C. income levels are low. D. government red tape is oppressive. E. economic growth is slow.

D. government red tape is oppressive.

The World Bank categories countries based on GNI per capita, using the following categories: A. undeveloped economies, developing economies, developed economies. B. developed economies, industrializing economies, developing economies. C. developing economies, newly industrializing economies, developed economies. D. high-income economies, middle-income economies, low-income economies. E. less developed economies, more developed economies.

D. high-income economies, middle-income economies, low-income economies.

According to the text, as the level of a government's debt increases A. a higher proportion of resources is invested into productive uses. B. government investments will increase. C. infrastructural investment will grow. D. consumer confidence will rise. E. more resources are directed toward payment of interest.

E. more resources are directed toward payment of interest.

The arithmetic average of the current exchange rate and the exchange rates in the two preceding years, adjusted by the ratio of domestic inflation to the combined inflation rates of the euro zone, Japan, the United Kingdom, and the United States, is known as A. the Gini coefficient. B. the Markov-Linder formula. C. the Kolgorov coefficient. D. the Zurich formula. E. the Atlas conversion factor.

E. the Atlas conversion factor.

According to the text, an important socioeconomic dimension is A. the increasing birth rate in most developed nations. B. the decreasing number of working women, which will increase demand for lower cost staples. C. the urban-to-rural shift, which impacts demand for housing. D. the increase in the number of elderly in developed nations, which reduces demand for health care. E. the increase in the number of working women, which may expand the market for convenience goods.

E. the increase in the number of working women, which may expand the market for convenience goods.

According to the text, primary reasons for relative changes in labor costs include increases or decreases in A. compensation. B. total output. C. inflation rates. D. hours worked. E. level of education.

a. compensation

The ratio between the number of older people and younger people, on whom elders are dependent to supply the funds to provide social security benefits, is called the ___________. A. dependency ratio B. grandparent dilemma C. population distribution D. population density E. graying challenge

a. dependency ratio

__________ is/are straining the social security systems of Japan and other industrialized nations. A. Early retirements B. The fact that retirees are working longer C. The fact that the birth rate is increasing D. The growing number of people in the workforce E. Decreasing lifespans

a. early retirements

A large international debt may cause a government to A. impose wage controls. B. increase government spending. C. eliminate price controls. D. restrict bankers' ability to issue debt. E. start a trade war.

a. impose wage controls

_______ refers to the total value of all income generated by the residents of a nation, including both the domestic production of goods and services and income from abroad. A. Gross domestic product B. Gross domestic income C. Gross national income D. Net national product E. Goods and services income

c Gross national income

__________ is a measure of how the inhabitants are distributed over a nation's area. A. Urbanization B. Population size C. Population distribution D. Population density E. Population

c. population distribution

According to the text, which of the following is not one of the rationales for why most seasoned managers supplement their analyses by looking at economic growth rates as well as measures of an economy's absolute size? A. Emerging and developing economies grew more than three times faster in 2012 and 2013 than did developed economies. B. GNI forecasts on their own are of no value to managers conducting economic analyses. C. Forecasts suggested that emerging and developing economies would grow at more than double the rate of developed economies in 2014 and 2015. D. Data such as overall GNI or GNI per capita can provide a snapshot of the size of an economy, but they fail to inform a manager about whether and how fast an economy is growing, or perhaps even shrinking. E. Rapid and rising economic growth rates suggest consumer demand, which often indicates that trade and foreign direct investment are likely to increase as well.

B. GNI forecasts on their own are of no value to managers conducting economic analyses.

According to the text, the market analyst may determine a country is not a good market by making a simple calculation based on A. GNI/capita, total population, and the size of the hidden economy. B. GNI, total population, and income distribution. C. GNI/capita, population by state or province, and the number of pharmacies. D. Pet sales, number of CD players, and per capita lint production. E. GDP, GDP growth rate, and tax burden.

B. GNI, total population, and income distribution.

The rate of growth of GNI/capita may be more important to marketers than just GNI/capita because A. a stable rate indicates low risk for entry. B. a high rate indicates a fast-growing market. C. a high rate indicates economic instability. D. low rates indicate political stability. E. it indicates how much investment will be needed for entry.

B. a high rate indicates a fast-growing market

According to the text, a large international debt may result in A. reduction in the level of component production at the local level. B. decreased levels of foreign exchange available for importing components for local assembly. C. increased numbers of importers. D. growing levels of sales by home country factories that sell to the subsidiary in the indebted nation. E. increasing consumer confidence.

B. decreased levels of foreign exchange available for importing components for local assembly.

The amount of income left after paying taxes and making essential purchases is known as A. personal savings. B. discretionary income. C. personal income. D. disposable income. E. free cash flow.

B. discretionary income.

According to the text, scarcity of foreign exchange can affect even firms that merely export to nations with high foreign debt because A. the government cannot borrow more money to pay for the exports. B. governments of those nations are likely to impose import restrictions. C. their export sales will depend on the ability of those governments to borrow foreign exchange. D. they will have to pay more for their foreign exchange. E. their wage rates will increase significantly.

B. governments of those nations are likely to impose import restrictions.

A measure of an economy's size based on the market value of goods and services produced within a nation in a year is A. net national income. B. gross domestic product. C. gross national product. D. gross national income. E. the Gini coefficient.

B. gross domestic product

From comparisons of income distribution studies over time, it appears that in early stages of development A. income inequality decreases. B. income inequality stays the same. C. the upper and lower quintiles grow at the expense of the middle quintile. D. the middle quintile grows at the expense of the upper and lower quintiles. E. The upper quintiles grow at the expense of the middle and lower quintiles.

B. income inequality stays the same.

According to the text, unit costs of labor will decrease even though the firm is required to pay more to workers, provided A. management compensation decreases significantly. B. productivity increases fast enough. C. advertising costs are proportional. D. interest rates rise slowly. E. government regulations are eliminated.

B. productivity increases fast enough.

__________ is a measure of the number of inhabitants per area unit. A. Urbanization B. Population size C. Population distribution D. Population density E. Population

d. population density

Generally, we can assume that the higher the GNI/capita value A. the lower the tax rate. B. the smaller the population. C. the larger the population. D. the more advanced the economy. E. the higher the growth rate.

d. the more advanced the economy

According to the text, the part of a nation's income that, because of unreporting or underreporting, is not measured by official statistics is known as the A. hidden economy. B. gray market. C. barter system. D. underground economy. E. shadow market.

d. underground economy