Global Economics Exam Solutions
Course Introduction
Global Economics explores the interconnected nature of economies around the world, examining the flow of goods, services, capital, and labor across borders. This course covers fundamental theories of international trade and finance, the role of global institutions such as the International Monetary Fund and World Bank, and the impact of globalization on developed and developing nations. Students will analyze policy issues like trade agreements, exchange rates, global supply chains, and economic crises, as well as the implications of economic integration and protectionism. The course equips students with the analytical tools to understand current international economic challenges and evaluate the effects of global economic policies on businesses, governments, and individuals.
Recommended Textbook
Global Business Today 7th Edition by Charles W. L. Hill
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Chapter 1: Globalization
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Sample Questions
Q1) Most forecasts now predict a rapid rise in world output accounted for by developing nations such as China,India,and South Korea,and a relative decline in the share enjoyed by rich industrialized countries such as Britain and the United States.
A)True
B)False
Answer: True
Q2) The motivation for much of the foreign direct investment by non-U.S.firms was the desire to:
A)disperse production activities to optimal locations and to build a direct presence in major foreign markets.
B)dilute the influence of the U.S.firms in global markets.
C)accelerate the spread of globalization to the poorer countries of Africa.
D)protect their domestic markets from competition from U.S.companies.
Answer: A
Q3) The Internet has acted as a regulatory brake on unfettered international trade in business.
A)True
B)False
Answer: False
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Page 3
Chapter 2: National Differences in Political Economy
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Sample Questions
Q1) The common law system enjoys a degree of flexibility not found in other systems because:
A)the common law system is usually found in democratic republics.
B)the common law system originated from Great Britain and can be found in almost all of its former colonies.
C)the law courts can interpret common law with regard to tradition,precedent,and custom.
D)the common law system is based on codified laws that encompass a wide spectrum of cases.
Answer: C
Q2) Since the late 1980s,which of the following trends has emerged in the political economies of many of the world's nation-states?
A)A wave of communist revolutions has swept the world.
B)Capitalist ideology has been in retreat.
C)A wave of democratic revolutions has swept the world.
D)A strong move toward centrally planned and mixed economies has been in evidence.
Answer: C
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Chapter 3: Differences in Culture
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Sample Questions
Q1) Islam has roots in both Judaism and _____.
A)Buddhism
B)Hinduism
C)Christianity
D)Confucianism
Answer: C
Q2) Class-based divisions between upper-class management and labor classes are instrumental in driving down production costs in countries characterized by significant class divisions.
A)True
B)False
Answer: False
Q3) Indictments against theft,incest,and cannibalism are examples of how violating _____ can bring about serious retribution.
A)structures
B)mores
C)folkways
D)etiquette
Answer: B
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Page 5
Chapter 4: Ethics in International Business
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Sample Questions
Q1) Straw men approaches to business ethics are raised by business ethics scholars primarily to demonstrate that they offer appropriate guidelines for ethical decision making in a multinational enterprise.
A)True
B)False
Q2) The best decisions,from a utilitarian perspective,are those that:
A)maximize the firm's profit.
B)reflect the ethics of the culture in which it is operating.
C)accommodate universal moral principles.
D)produce the greatest good for the greatest number of people.
Q3) Which of the following is NOT one of the five things an international business and its managers can do to make sure ethical issues are considered in business decisions?
A)Favor hiring and promoting people with a well-grounded sense of personal ethics.
B)Develop moral courage.
C)Build an organizational culture that has a high value on ethical behavior.
D)Put decision-making processes in place that requires people to consider purely the economic dimension of business decisions.
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Chapter 5: International Trade Theory
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Sample Questions
Q1) Climate and natural resource endowments explain all of the following happening,EXCEPT:
A)Brazil exporting coffee.
B)Switzerland exporting watches.
C)China exporting crawfish.
D)Saudi Arabia exporting oil.
Q2) David Ricardo's theory of comparative advantage attempts to rationalize why some countries export automobiles,consumer electronics,and machine tools,while other countries export chemicals,watches,and jewelry.This rationalization is best explained in terms of:
A)absolute advantage with reference to natural resources.
B)international differences in labor productivity.
C)the proportions in which the factors of production are available.
D)the cultural histories of the exporting nations.
Q3) Ricardo's theory leads us to expect that despite the short-term adjustment costs associated with adopting a free trade regime,trade would seem to produce a greater economic growth and higher living standards in the long run.
A)True
B)False
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Chapter 6: The Political Economy of International Trade
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Sample Questions
Q1) The extra profit that producers make when supply is artificially limited by an import quota is referred to as a:
A)trade surplus.
B)quota rent.
C)trade reconciliation.
D)profit hike margin.
Q2) A particularly odd aspect of the Smoot-Hawley tariff-raising binge was that the United States was running a balance-of-payment surplus at the time and it was the world's largest _____ nation.
A)debtor
B)free-trade
C)importing
D)creditor
Q3) What is a subsidy? Provide some examples of the forms that subsidies take.How do subsidies help domestic producers?
Q4) Free trade in agriculture could help to jump-start economic growth among the world's poorer nations and alleviate global poverty.
A)True
B)False
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Chapter 7: Foreign Direct Investment
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Sample Questions
Q1) The United States refused to sign the multilateral agreement on investment (MAI)in 1998 because it:
A)would not have allowed restricting foreign television programs and music in the name of preserving culture.
B)contained binding environmental and labor agreements that the U.S.found to be too restrictive.
C)contained too many exceptions that would weaken its powers.
D)would have barred discriminatory taxation of foreign-owned companies.
Q2) Direct effects of FDI on employment in the host country arise when a foreign MNE: A)brings in managers trained in the latest management techniques from the home country.
B)creates jobs because of increased local spending by employees of the MNE.
C)employs a number of host country citizens.
D)causes local suppliers to hire more people.
Q3) Services,such as telecommunications,retailing,and many financial services,where the service has to be produced where it is delivered,lend themselves well to exporting.
A)True
B)False
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Chapter 8: Regional Economic Integration
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Sample Questions
Q1) Which of the following observations is true of the European Parliament?
A)It polices rule violations by member nations.
B)It is the co-equal legislator for almost all European laws.
C)Its power has gradually declined over the years.
D)Its members are nominated by governments.
Q2) Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.
A)True
B)False
Q3) Which of the following is a component of the North American Free Trade Agreement?
A)Abolition by 2004 of tariffs on 100 percent of the goods traded between Mexico,Canada,and the United States.
B)Removal of restrictions on foreign direct investment between the three member countries with no exceptions.
C)Reduction of national environmental standards to bring in foreign direct investment.
D)Removal of most barriers on the cross-border flow of services.
Q4) Discuss the benefits associated with the euro.
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Chapter 9: The Foreign Exchange Market
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Sample Questions
Q1) Carry trade has a speculative element attached to it.
A)True
B)False
Q2) The foreign exchange market is a market for converting the currency of one country into that of another country.
A)True
B)False
Q3) The Fisher effect states that a country's "nominal" interest rate (i)is:
A)the sum of the required "real" rate of interest (r)and the expected rate of inflation over the period for which the funds are to be lent (I).
B)the difference between the required "real" rate of interest (r)and the expected exchange rate in the future (E).
C)the sum of the required "current" rate of interest (i)and the expected exchange rate (E).
D)the difference between the required "real" rate of interest (r)and the expected rate of inflation over the period for which the funds are to be lent (I).
Q4) What is carry trade? Is it speculative in nature? Explain with an example.
Q5) Explain the concepts of (1) transaction exposure and (2) translation exposure.
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Chapter 10: The International Monetary System
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Sample Questions
Q1) The Bretton Woods system could work only as long as the U.S.inflation rate remained low and the United States did not run a balance-of-payments deficit.
A)True
B)False
Q2) Many of the world's most developed nations peg their currencies,primarily to the dollar or the euro.
A)True
B)False
Q3) Which of the following was a key feature of the South Korean agreement with the IMF following the rescue deal in 1997?
A)Opening up of the Korean economy and banking system to foreign investors
B)Give more autonomy to the chaebol by increasing their share of bank financing
C)Lowering of interest rates to near-zero levels to spur investment
D)Introduction of trade-related subsidies and stringent import licensing norms
Q4) Under the Bretton Woods agreement,all countries were to fix the value of their currency in terms of gold but were not required to exchange their currencies for gold.
A)True
B)False
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Page 12
Chapter 11: The Strategy of International Business
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Sample Questions
Q1) When customers place an order for a Dell product over the firm's Web site,that data is immediately transmitted,via the Internet,to suppliers,who then configure their production schedules to produce and ship that product so that it arrives at the right assembly plant at the right time,thus reducing the amount of inventory held at factories and saving costs.This is an example of how a company can use its _____ to create value.
A)finance function
B)information systems
C)human resources
D)service function
Q2) The company infrastructure is a support activity.
A)True
B)False
Q3) The _____ shows all of the different positions that a firm can adopt with regard to value creation and low cost assuming that its internal operations are configured adequately to support a particular position.
A)demand-value model
B)experience curve
C)efficiency frontier
D)optimal output model
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Chapter 12: Entering Foreign Markets
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Sample Questions
Q1) Which of the following is a disadvantage of joint ventures?
A)Joint ventures with local partners face a high risk of being subject to various forms of adverse government interference
B)It can lead to conflicts and battles for control between the investing firms
C)Companies have short-term commitment toward foreign market
D)It is generally the most costly method of serving a foreign market from a capital investment standpoint
Q2) When a firm makes an acquisition in a foreign market,it acquires valuable intangible assets.
A)True
B)False
Q3) Which of the following is one of the factors that determine the value an international business can create in a foreign market?
A)The product's success in the home market
B)The availability of raw material
C)The inflation rates in the country
D)The suitability of its product offering to that market
Q4) Discuss the influence of pressures for cost reductions on a firm's choice of entry mode.
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Chapter 13: Exporting,Importing,and Countertrade
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Q1) What is the drawback for the importer in using a letter of credit?
A)The importer loses control over the process of trading.
B)The system is skewed heavily in favor of the exporter.
C)It may reduce his ability to borrow funds for other purposes.
D)The loan must be repaid even before the merchandise has been solD.
Q2) The United States has now evolved an institutional structure for promoting exports that is better than that of either Germany or Japan. United States has not yet evolved an institutional structure for promoting exports similar to that of either Germany or Japan.
A)True B)False
Q3) The letter of credit reduces the importer's ability to borrow funds for other purposes. A)True B)False
Q4) Simple ignorance of potential opportunities is a huge barrier to exporting.
A)True
B)False
Q5) Briefly describe the mechanisms for financing export and imports.
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Chapter 14: Global Production,Outsourcing,and Logistics
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Sample Questions
Q1) Flexible manufacturing technologies enable companies to:
A)customize products to the demands of small consumer groups.
B)build large inventories.
C)achieve product standardization across markets.
D)increase their work in progress.
Q2) When is decentralization of manufacturing appropriate?
A)The product serves universal needs.
B)Important exchange rates are expected to remain relatively stable.
C)The product's value-to-weight ratio is high.
D)Trade barriers are substantial.
Q3) Strategic alliances with suppliers were pioneered in:
A)America by large chemical producers like Dow.
B)Japan by large auto companies such as Toyota.
C)Europe by large electronics firms like Philips.
D)Germany by telecommunications companies like Deutsche Telekom.
Q4) The practice of offsets is common in which industry?
A)Local print media
B)Handicrafts
C)Commercial aerospace
D)Real estate
Page 16
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Chapter 15: Global Marketing and RD
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Sample Questions
Q1) Developed countries tend to have less retail concentration than developing countries.
A)True
B)False
Q2) In terms of pricing decisions,full responsibility for pricing decisions should be delegated to the managers of various national subsidiaries,thereby reaping the benefits of decentralization.
A)True
B)False
Q3) In a(n)_____ retail system,a few retailers supply most of the market.
A)fragmented
B)dispersed
C)isolated
D)concentrated
Q4) 101.The optimal mix of push and pull strategies depends on product type and A)consumer sophistication.
B)government policies.
C)industry regulations.
D)channel width.
Q5) Describe channel quality.
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Chapter 16: Global Human Resource Management
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Sample Questions
Q1) Firms may see an ethnocentric staffing policy as
A)reducing the costs of value creation.
B)inappropriate for a localization strategy.
C)the best way to maintain a unified corporate culture.
D)the most inexpensive to implement.
Q2) Expatriate managers who lack others-orientation tend to treat foreign nationals as if they were home-country nationals.
A)True
B)False
Q3) What is the main difference between international businesses in terms of their approaches to international labor relations?
A)The degree to which labor relations activities are centralized or decentralized
B)The degree to which labor relations are formal or informal
C)The degree to which labor relations are given a high priority or a low priority
D)The degree to which labor relations are internally or externally managed
Q4) What is the purpose of cultural training for an expatriate? How can "culture shock" be avoided?
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