Final Exam International Business (Chapters 7-11)

A country that relies on the pragmatic nationalist view would say that

FDI should be allowed so long the benefits outweigh the costs

How did the Smoot-Hawley Act affect employment?

It had damaging effect on employment abroad

A customs union differs from a free trade area because it allows for

adoption of a common external trade policy.

An American company sold heavy building materials to the government of Taiwan. Instead of receiving U.S. dollars, the company agreed to take payment in the form of Taiwanese goods. This is an example of

countertrade.

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

currency swap

Some countries have a policy that entirely restricts the export of coffee products. This is called a(n)

export ban

In countries that adopt a _____ exchange rate system, the values of currencies are set against each other at some mutually agreed-on exchange rate.

fixed

When Norway, Iceland, Liechtenstein, and Switzerland were joined by the EFTA, all barriers to the free flow of goods and services between the countries was removed. Member nations are allowed to determine the level of trade protection for goods coming from all other nations. What level of economic integration does this represent?

free trade area

As an investor studying the gold standard, Kyle knows that he would need 44 euros to purchase one ounce of gold. These 44 euros represent the

gold par value

A(n) _____ market is one in which prices do not reflect all available information.

inefficient

A foreign government was not enforcing its intellectual property rights, which resulted in massive copyright infringements. In turn, this was costing U.S. companies millions of dollars in lost sales revenues. To force the country to play by the rules, the United States threatened to impose trade sanctions on a range of imports from the country's businesses. The underlying motive for intervention by the U.S government was

retaliation

________ is variously defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their "fair" market value.

Dumping

The ultimate controlling authority with the EU is the

European Council

One reason the British electorate voted to exit the European Union is because of an increase in ________ within Europe.

Immigration

The Bretton Woods agreement created which two multinational institutions?

International Monetary Fund and the World Bank

Mexico agreed to NAFTA after it was determined that the country's oil industry would be controlled by Mexico. Why did Mexico fight for this right?

It wanted to maintain national sovereignty

________ is a pact among Argentina, Brazil, Paraguay, and Uruguay to establish a free trade area.

Mercosur

The United States imports sugar from several nations. If the NAFTA agreement caused the United States to import sugar only from Canada, even though it cost more to do so, it would be an example of

Trade diversion

Which organization was created to implement the GATT agreement?

World Trade Organiztion

In a floating exchange rate system, a current account deficit is likely to be corrected by

a depreciation in its exchange rate.

One focus of strategic trade policy is to help domestic companies gain

a first-mover advantage

One form of FDI is ________, which involves the establishment of a new operation in a foreign country.

a greenfield investment

A(n) _____ system refers to one in which a country's currency is nominally allowed to float freely against other currencies but in which the government will intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value.

dirty-float

The extent to which a firm's future international earning power is affected by changes in exchange rates is known as

economic exposure.

TickTock Inc., an American watchmaker, makes custom watches in California, which it then ships to Brazil for sale there. Based on this information, TickTock Inc. is involved in

exporting

It is one of Garrett's job responsibilities to report the amount of foreign direct investment undertaken by the government over a one-year time period. Garrett reports the ________ of FDI.

flow

Translation exposure refers to the

impact of currency exchange rate changes on the reported financial statements of a company.

A tariff rate quota provides a lower tariff rate to

imports within the quota

Assume that the exchange rate between the U.S. dollar and the Japanese yen is $1 = ¥150. A book that retails for $10 in New York should sell for ¥1,500 in Tokyo, if there are no trade barriers and transportation costs, according to the

law of one price

When the management team reviewed its government contract on office furnishings, they noticed that in order to bid on the project, at least 44 percent of the value of the office furniture had to be produced in the United States. This stipulation is an example of a(n)

local content requirement

When companies behave recklessly because they know they will be saved if things go wrong, it is called a

moral hazard

________ arises when two or more enterprises encounter each other in different regional markets, national markets, or industries.

multipoint copmetition

TransWare Inc., based in Atlanta, has a plant in Russia that builds road equipment. Each year this plant has been profitable, but TransWare 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

Subsidies and quotas are examples of ________ barriers a county might impose.

nontariff

The currency of Panama, the balboa, is fixed relative to the U.S. dollar. As a result, the U.S. dollar exchange rate determines the exchange rate between the Panama balboa and other currencies. This is an example of a _____ exchange rate.

pegged

A country in a state of fundamental disequilibrium suffers from

permanent adverse shifts in the demand for their products.

A(n) ________ refers to the extra profit that producers make when supply is artificially limited by an import quota.

quota rent

The Single European Act was put in place in an attempt to

remove all impediments to the formation of a single market.

Ownership restraint is a method of

restricting inward FDI by a host country

A firm might justify a preference for licensing over FDI because licensing

results in the licensee bearing the costs and risks.

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

spot exchange rate.

In terms of the approaches to exchange rate forecasting, _____ is based on the premise that there are analyzable market trends and waves and that previous trends and waves can be used to predict future trends and waves.

technical analysis

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

the U.S. dollar

An economist would say that the benefits of regional integration are determined by

the amount of trade creation

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

One of the main benefits that FDI provides to the home country is

the home country's balance of payments benefits from the inward flow of foreign earnings.

The stock of FDI refers to the

total accumulated value of foreign-owned assets at a given time.

Two eastern European countries formed a free trade agreement. As a result, one of the countries that used to produce its own plastic bottles at a higher cost now imports them from the other country at a lower cost. This is an example of

trade creation

A country that imports more goods than it exports experiences a

trade deficit