International Business Practice Questions

Course Introduction

International Business explores the strategies, operations, and challenges faced by organizations conducting commerce across national borders. This course covers fundamental concepts such as globalization, international trade theories, cultural differences, global supply chains, foreign direct investment, and risk management. Students will examine the influences of political, economic, legal, and technological environments on business decisions as well as the ethical considerations and cultural sensitivities essential for success in diverse markets. Through case studies and practical analysis, students will develop an understanding of how multinational enterprises formulate strategies, enter foreign markets, and compete effectively in the global business landscape.

Recommended Textbook

Introduction to International Economics 3rd Edition by Dominick Salvatore

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Page 2

Chapter 1: Introduction to the Global Economy

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Sample Questions

Q1) The loose organization that blames globalization for many human and environmental problems throughout the world is:

A)The World Trade Organization

B)The World Bank

C)the protectionist movement

D)the anti-globalization movement

Answer: D

Q2) The anti-globalization movement believes globalization benefits corporations and multinationals at the expense of human and environmental well-being.

A)True

B)False

Answer: True

Q3) In the last decade,the United States averaged a _______ percent unemployment rate

A)15

B)20

C)Less than 5

D)10

Answer: C

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Page 3

Chapter 2: Comparative Advantage

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Q1) ______________ states that the true cost of a commodity is the amount of a second commodity that must be given up to release just enough resources to produce one more unit of the first commodity:

A)Mercantilism

B)The law of comparative advantage

C)The labor theory of value

D)The opportunity cost theory

Answer: D

Q2) The analysis of economic forces that justify the existence of trade and its degree between two nations is referred to as:

A)basis for trade

B)losses from trade

C)gains from trade

D)pattern of trade

Answer: A

Q3) Adam Smith strongly advocated a policy of laissez-faire.

A)True

B)False

Answer: True

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Page 4

Chapter 3: The Standard Trade Model

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Q1) Community indifference curves that are ______________ show greater satisfaction,while community indifference curves _____________ show less satisfaction.

A)Closer to the origin,further from the origin

B)Concave to the origin,convex to the origin

C)Convex to the origin,concave to the origin

D)Further from the origin,closer to the origin

Answer: D

Q2) How many indifference curves could a nation have for a particular pair of goods?

A)one for each trade partner

B)two

C)one

D)an infinite number

Answer: D

Q3) Community indifference curves can never ___________.

A)be negatively sloped

B)intersect

C)lie tangent to the production possibilities frontier

D)be different for each nation

Answer: B

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Chapter 4: The Heckscher-Ohlin and Other Trade Theories

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Q1) Assume a nation where labor is mobile between industries but capital is not.The specific-factors model states that trade leads to which of the following?

A)An increase in the return to capital used to produce the nation's export commodity

B)An increase in the return to capital used in the nation's import-competing industry

C)A decrease in the return to capital used to produce the nation's export commodity

D)An increase in the return to labor used in the production of both imports and exports.

Q2) In his empirical test of Heckscher and Ohlin's model,Leontief found that

A)the US imported more labor intensive goods and exported more capital intensive goods.

B)the US imported more capital intensive goods and exported more labor intensive goods.

C)the US imported and exported more labor intensive goods.

D)the US imported and exported more capital intensive goods.

Q3) Transportation cost the extent of trade.Can transportation cost have the potential to completely eliminate any possibility of trade?

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Chapter 5: Trade Restrictions: Tariffs

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Q1) Graphically,consumer surplus is measured by the area between the supply curve and the market price.

A)True

B)False

Q2) Graphically,how is the consumer surplus measured?

A)the area above the demand curve

B)the area under the demand curve and above the market price

C)the area above the supply curve and below the market price

D)the area under the supply curve

Q3) __________ constitute the regulations governing a nation's international trade.

A)Tariff policies

B)Commercial policies

C)Non-tariff barriers

D)Globalization policies

Q4) The revenue collected by the government as a result of an imposed tariff is attributed to the:

A)production effect of a tariff

B)trade effect of a tariff

C)revenue effect of a tariff

D)consumption effect of a tariff

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Chapter 6: Nontariff Trade Barriers and the Political

Economy of Protectionism

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Q1) Strategic trade policy is concerned with protecting,and assisting in creating comparative advantage in:

A)agricultural commodities

B)transportation related industries

C)national growth-affecting industries

D)unskilled labor-intensive industries

Q2) When a firm produces some of the parts or components that it uses in its products,in its own plants abroad,the process is known as:

A)outsourcing

B)offshoring

C)globalization

D)dumping

Q3) Briefly discuss the four major rounds of international trade negotiations held under the direction of the General Agreement on Tariffs and Trade.Include discussion of the primary outcomes of each round.

Q4) When it comes to quota and tariff,how are the effects on the economy different?

Q5) Non-tariff barriers are also known as "new protectionism".

A)True

B)False

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Chapter 7: Economic Integration

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Q1) Direct investments made in a nation or other economic units to avoid import tariffs are known as:

A)tariff factories

B)tariff diversion

C)tariff creation

D)duty-free zones

Q2) Customs unions tend to reduce the level of competition among member nations.

A)True

B)False

Q3) The United States benefits from NAFTA include:

A)Increased competition in product markets

B)Increased competition in resource markets

C)Lower price of many U.S commodities

D)All of the above

Q4) Which of the following is not an example of dynamic benefits of the formation of customs unions?

A)increased competition

B)stimulus to investment

C)better utilization of economic resources

D)trade creation and trade diversion

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Chapter 8: Growth and Development With International Trade

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Q1) One of the most serious problems facing developing countries today is the lack of high paying corporate level positions,as this is the type of skilled labor needed to alleviate the poverty problem in these nations.

A)True

B)False

Q2) The New International Economic Order called for which of the following?

A)The renegotiation of the international debt of developing countries and the reduction in interest payments.

B)The establishment of international commodity agreements.

C)Preferential access in developed nations' markets to all the manufactured exports of developing nations.

D)All of these options are correct.

Q3) Which economist found that export instability was somewhat larger for developing nations than for developed nations during the postwar period?

A)Hans Singer

B)Alasdair MacBean

C)Alfred Marshall

D)Kenneth Arrow

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Chapter 9: International Resource Movements and Multinational Corporations

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Q1) According to the_________________ model,returns on capital are originally higher in the nation having the ___________ overall relative capital-labor ratio.

A)Heckscher-Ohlin; higher

B)Heckscher-Ohlin; lower

C)Stolper-Samuelson; higher

D)Stolper-Samuelson; lower

Q2) The basic motive for international portfolio investments is

A)to earn higher returns domestically than are possible abroad.

B)to earn higher returns abroad than are possible domestically.

C)to earn returns domestically on incomes earned abroad.

D)to earn returns abroad that cannot be taxed domestically.

Q3) The United States government considers the purchase of voting stocks in a corporation as portfolio investment as long as the purchased voting stocks remain?

A)less than 20%

B)less than 35%

C)less than 15%

D)less than 10%

Q4) What are the basic reasons for a multinational corporations (MNCs)existence?

Page 11

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Chapter 10: Balance of Payments

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Q1) Which of the following is an example of a capital outflow for the US?

A)A domestic increase of assets held by foreign investors

B)A reduction in US foreign asset holdings

C)An increase in US foreign asset holdings

D)Unilateral transfers from foreigners

Q2) Debit transactions involve the receipt of payments from foreigners.

A)True

B)False

Q3) Which of the following is classified as a credit in the US balance of payments?

A)US exports

B)US gifts to other countries

C)A flow of gold out of the US

D)Foreign loans made by US companies

Q4) Which of the following is not true about a nation's balance of payment?

A)Balance of Payment information is important to Banks

B)Balance of Payment keeps record or all the transactions that took place between the resident of a country and the rest of the world

C)Balance of Payment is useful to individuals involved in international trade and finance

D)Balance of Payment information is not important for a business firm

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Chapter 11: The Foreign Exchange Market and Exchange Rates

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Sample Questions

Q1) An exchange rate is defined as:

A)the interest rate at which currencies can borrowed

B)the domestic currency price of the foreign currency

C)the ratio of export prices to import prices

D)The domestic currency price of a market basket of the most traded currencies in the world

Q2) What is the primary difference between speculation and arbitrage in the foreign exchange market?

A)They are fundamentally the same transaction

B)Arbitrage involves transactions separated by time,while speculative transactions take place in concurrent markets

C)Speculation is risk free,arbitrage is not

D)Speculative transactions are separated by time,while arbitrage occurs in concurrent markets

Q3) Exchange rates are not free to fluctuate in response to market forces.

A)True

B)False

Q4) Name and briefly describe the four levels of agents or participants in the foreign exchange market.

Page 13

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Chapter 12: Exchange Rate Determination

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Q1) If the price for a Big Mac in the US is $2.00 and the price for a Big Mac in the UK is 3,what is the absolute purchasing-power parity equilibrium exchange rate between the dollar and the Euro (using the dollar as the domestic currency)?

A).667

B)1.5

C).333

D)None of the above

Q2) Which of the following approaches to exchange rate determination stresses the role of the flow of goods and services in the determination of exchange rates?

A)The portfolio model of exchange rates

B)The asset model of exchange rates

C)The trade approach to exchange rates

D)All of the above

Q3) The nominal exchange rate is the exchange rate or the domestic currency price of the foreign currency.

A)True

B)False

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Chapter 13: Automatic Adjustments With Flexible and Fixed Exchange Rates

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Q1) The mint parity plus the cost of shipping an amount of gold equal to one unit of the foreign currency between the two nations is:

A)gold export point

B)gold import point

C)price-specie-flow mechanism

D)equilibrium level of income

Q2) The marginal propensity to save is the amount of additional savings associated with each one-dollar increase in income multiplied by the increase in income.

A)True

B)False

Q3) What is the Marshall-Lerner Condition and how is it used?

Q4) If for every one dollar increase in income,savings increases by 25 cents,the marginal propensity to consume is _________ and the closed economy multiplier is ______.

A).25,4

B).75,4

C).25,.04

D).75,1.333

Q5) Please explain the J-Curve effect in exchange rate determination.

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Chapter 14: Adjustment Policies

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Q1) What actions should be taken under the internal-external imbalance of recession and surplus?

A)Expansionary fiscal policy to correct for recession,and expansionary monetary policy to correct for surplus

B)Expansionary fiscal policy to correct for surplus,and contractionary monetary policy to correct for recession

C)Contractionary fiscal policy to correct for recession,and expansionary monetary policy to correct for surplus

D)Contractionary fiscal policy to correct for excess surplus,and contractionary monetary policy to correct for recession

Q2) Which of the following is an organization that works towards international economic development?

A)GAB

B)OECD

C)GSP

D)OPEC

Q3) Why during the period of fixed exchange rate,monetary policy is considered to be ineffective.

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Page 16

Chapter 15: Flexible Versus Fixed Exchange Rates,european

Monetary Systems,and Macroeconomic Policy

Coordination

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Q1) Under which system does a nation not concern itself with external balance?

A)flexible exchange rate system

B)fixed exchange rate system

C)managed peg

D)gold standard

Q2) Under a flexible exchange rate system,monetary policies must be changed in order to correct the nation's balance of payments disequilibrium.

A)True

B)False

Q3) What are the advantages of International Macroeconomic Policy Coordination?

Q4) Under a(n)_____________ ,the nation's monetary authorities are entrusted with the responsibility of intervening in foreign exchange markets to smooth out short-run fluctuations in exchange rates without attempting to affect their long-run trend.

A)currency board arrangements

B)adjustable peg system

C)crawling peg system

D)managed floating exchange rate system

Page 17

Q5) What are the advantages and disadvantages of fixed versus flexible exchange rates?

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Page 18

Chapter 16: The International Monetary System: Past, present, and Future

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Q1) What economic term represents the large amount of foreign-held dollars resulting from past US balance-of-payments deficits?

A)Dollar superfluity

B)Dollar overhang

C)Dollar glut

D)Unaccounted dollars

Q2) What are the arrangements under which the IMF negotiated to borrow from the "Group of Ten" and Switzerland to augment its resources?

A)General Arrangements to Borrow

B)Diminutive arrangements

C)Standby arrangements

D)Swap arrangements

Q3) What policy should a country like the United States pursue in the face of increased competition from manufactured exports of emerging economies?

Q4) After the Smithsonian Agreement and the devalued dollar,it was even more prudent for the US to maintain a stock of gold for convertibility purposes.

A)True

B)False

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