International Economics Exam Bank
Course Introduction
International Economics explores the principles and dynamics governing economic interactions between countries, including trade, investment, and monetary relations. The course covers theories of international trade, the effects of tariffs and quotas, the determinants of exchange rates, and the role of international financial institutions. Students will analyze how globalization influences national economies, assess current policy issues such as trade agreements and economic integration, and gain an understanding of contemporary challenges in the global economic environment.
Recommended Textbook
International Business Environments Operations 14th Edition by John Daniels
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Chapter 1: Globalization and International Business
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Q1) International business includes all commercial transactions between two or more countries.
A)True
B)False
Answer: True
Q2) Gaining some understanding of international business is important for any business student because global events and competition affect almost all companies.
A)True
B)False
Answer: True
Q3) Supporters of globalization assert that the process helps countries strengthen their sovereignty.
A)True
B)False
Answer: False
Q4) Globalization refers to all economic transactions among countries.
A)True
B)False
Answer: False
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Chapter 2: The Cultural Environments Facing Business
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Q1) Cultural change may come by choice or imposition.
A)True
B)False
Answer: True
Q2) What are the advantages and disadvantages of using a nation as a point of reference for a culture?
Answer: The nation provides a workable definition of a culture for international business because basic similarity among people is both a cause and an effect of national boundaries.The laws governing business operations also apply primarily along national lines.Within the bounds of a nation are people who largely share essential attributes,such as values,language,and race.However,these shared attributes do not mean that everyone in a country is alike,nor do they suggest that each country is unique in all respects.
Q3) Cultural change imposed by an alien culture is called ________.
A) multicultural ethnocentrism
B) cultural imperialism
C) collectivism
D) high-context
Answer: B
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Page 4
Chapter 3: The Political and Legal Environments Facing Business
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Q1) Countries with a theocratic legal system encourage precise,detailed contracts whereas countries with a common legal system encourage shorter and less specific contracts.
A)True
B)False
Answer: False
Q2) The ________ of a country specifies the rules that regulate behavior,the processes by which laws are enforced,and the procedures used to resolve grievances.
A) political system
B) political philosophy
C) philosophical orientation
D) legal system
Answer: D
Q3) Local content regulations are primarily intended to ________.
A) address cultural differences between local employees and expatriates
B) encourage MNEs to increase production activities in a country
C) address contract negotiation difficulties
D) assess local tax rates on MNEs
Answer: B
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Chapter 4: The Economic Environments Facing Businesses
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Q1) Country X has a significant amount of external debt. Which of the following is the most likely cause?
A) The government of Country X borrowed money from local banks.
B) The government of Country X borrowed money from other governments.
C) The government of Country X spent more than it collected in revenues.
D) The government of Country X received short-term credits from selling bonds.
Q2) The BRICs are the strongest developed economies in the world.
A)True
B)False
Q3) What is the difference between a command economy and state capitalism?
Q4) Which of the following is most typical of a command economy?
A) Consumers have choices of many substitutes for any given product.
B) Quality of products and services tends to be consistent.
C) The prices of goods and services frequently change.
D) Many products are usually in short supply.
Q5) Uneven income distribution is largely a problem confined to poorer nations.
A)True
B)False
Q6) What is inflation? How does inflation affect international business?
Q7) What issues complicate international economic analysis?
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Chapter 5: Globalization and Society
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Q1) The requirement by the U.S. government that its subsidiaries abroad comply with trade restrictions with Cuba is an example of ________.
A) utilitarianism
B) extraterritoriality
C) absolute advantage
D) relative advantage
Q2) Which stakeholder group primarily wants additional sales and increased productivity?
A) customers
B) shareholders
C) society at large
D) government
Q3) Which of the following is NOT a likely reason for companies to act more ethically?
A) Consumer boycotts may result from unethical corporate behavior.
B) Irresponsible and unethical actions may lead to legal problems for MNEs.
C) Unethical or irresponsible behavior can negatively impact employee morale.
D) The U.N. Global Compact enforces fines on global firms that fail to act ethically.
Q4) What is extraterritoriality? Why is the concept controversial?
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Chapter 6: International Trade and Factor Mobility Theory
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Q1) All of the following are examples of international labor mobility EXCEPT ________.
A) a manager assigned by an MNE to work short-term abroad
B) a refugee who takes up employment in another country
C) a college student on a study abroad program
D) an illegal immigrant working in another country
Q2) The term brain drain describes the export of high-technology products in exchange for low-technology products.
A)True
B)False
Q3) The factor proportions theory holds that countries should improve their competitiveness by importing capital and skilled employees from abroad.
A)True
B)False
Q4) Countries enact trade policies based on trade theories,which,in turn,affect companies' optimum production locations.
A)True
B)False
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Chapter 7: Governmental Influence on Trade
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Q1) Export controls are highly effective for digital products,such as computers,TVs,and cameras.
A)True
B)False
Q2) A voluntary export restriction (VER)refers to ________.
A) an agreement between two countries to reciprocally restrict exports to one another
B) requests by governments for companies to limit exports of militarily useful technology
C) limits companies' exports to increase domestic supplies
D) limits placed on exports by a government of an exporting country at the request of the government of an importing country
Q3) Which of the following is NOT causing greater complexity in the regulation of trade?
A) growth in export tariffs
B) services available over the Internet
C) heightened concern about product safety
D) development of new products that must be classified
Q4) Describe and compare the different types of tariffs (duties).
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Page 9
Chapter 8: Cross-National Cooperation and Agreements
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Q1) Each country in NAFTA sets its own tariffs to the rest of the world.
A)True
B)False
Q2) An NGO is ________.
A) an agency of the United Nations
B) a private institution independent of a government
C) any organization working on environmental issues
D) an organization that is concerned only with workers' rights
Q3) The major trade groups in South America are CAN and MERCOSUR.
A)True
B)False
Q4) The three major responsibilities of the ________ are legislative power,control over the budget,and supervision of executive decisions.
A) European Commission
B) European Council
C) European Parliament
D) European Court of Justice
Q5) Why is geography important to most regional trade agreements? Provide examples of RTAs to illustrate your answer.
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Chapter 9: Global Foreign-Exchange Markets
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Q1) Stella,who works and lives in San Diego,wants to send money to her mother who lives in a small village south of Puerto Vallarta,Mexico. Stella typically uses Western Union to handle the transaction. Which of the following is the most likely reason that Stella uses Western Union?
A) no fees
B) convenience
C) low exchange rates
D) cross rate capability
Q2) Which of the following is NOT one of the top four locations for trading foreign exchange?
A) London
B) New York
C) Tokyo
D) Hong Kong
Q3) Which of the following handles the majority of all foreign exchange activities?
A) multinational enterprises
B) commodities exchanges
C) commercial banks
D) regional banks
Q4) What is a futures contract? What institutions handle futures contracts?
Page 11
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Chapter 10: The Determination of Exchange Rates
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Q1) In a short essay,compare the roles of the Federal Reserve Bank of New York and the European Central Bank.
Q2) The Bretton Woods Agreement established a system of fixed exchange rates under which each IMF member country set a ________.
A) quota
B) par value
C) gold standard
D) nominal interest rate
Q3) How do exchange rate changes affect a company's marketing,production,and financial decisions? What predictors should a manager monitor to forecast exchange rate changes?
Q4) Which of the following links together the central banks of the world and acts as a central banker's bank?
A) the IMF
B) the World Bank
C) the BIS
D) the EMU
Q5) What are the main arguments for and against Africa developing a common currency like the EU?
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Chapter 11: The Strategy of International Business
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Q1) What is the difference between primary and secondary activities in the value chain?
Describe the functions of configuration and coordination in these value activities.
Q2) A company that employs a ________ strategy creates value by generating customer insights and translating those insights into innovations.
A) differentiation
B) diversification
C) cost leadership
D) innovation
Q3) No matter the country or culture,money has three fundamental features that motivate consumers around the world to maximize purchasing power by buying the highest possible quality product for the lowest possible price. These three features include all of the following EXCEPT which one?
A) scarcity
B) difficulty of acquisition
C) difficulty of allocation
D) difficulty of saving
Q4) What is configuration? Briefly list and discuss the factors that influence value chain configuration.
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Page 13
Chapter 12: Country Evaluation and Selection
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Q1) Unlike grids,matrices do not require managers to determine weights for factors that indicate risk.
A)True
B)False
Q2) Comparing countries in international business is LEAST useful for determining the ________.
A) best location for sales and production
B) sequence of entering different countries
C) amount of resources to allocate in each country
D) selection of which managers to send to which countries
Q3) Committing resources to one country usually means forgoing or delaying projects in others.
A)True
B)False
Q4) A company's overall geographic strategy should be flexible enough to ________.
A) implement concentration strategies instead of diversification strategies
B) respond to new opportunities and withdraw from less profitable ones
C) import from anywhere in the world to a single production location
D) export anywhere in the world from a single production location
Q5) What is scanning? What opportunities and risks are most relevant to scanning?
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Chapter 13: Export and Import
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Q1) All of the following are benefits of countertrade EXCEPT ________.
A) decreasing trade protectionism
B) increasing access to innovative technology
C) developing new trade relationships with foreign companies
D) preserving foreign exchange reserves
Q2) The CEO of Coffman Enterprises wants to export products to foreign markets. However,top executives at Coffman are concerned that the firm will face fierce competition from foreign rivals because Coffman lacks significant core competencies. The executives are most likely worried that Coffman lacks ________.
A) capital advantages
B) internalization advantages
C) location advantages
D) ownership advantages
Q3) Companies can anticipate conducting countertrade with businesses in countries that ________.
A) experience widespread economic problems
B) command strong negotiation positions
C) have sufficient access to cash
D) weakly regulate international trade
Q4) What are export management companies,and how do they help potential exporters?
Page 15
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Chapter 14: Direct Investment and Collaborative Strategies
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Q1) There are two ways companies can invest in a foreign country. They can either acquire an interest in an existing operation or construct new facilities. In a short essay,describe the advantages and disadvantages of each alternative.
Q2) What is an international joint venture?
A) an international agreement between two or more companies to have access to each other's patents
B) the ownership of a company by two or more companies, of which at least one is a foreign company where the venture is located
C) an international agreement between two or more firms for the use of a trademark
D) an agreement between two or more organizations to share management expertise
Q3) In which of the following situations would Company X most likely seek a collaborative arrangement with Company Z in which Company Z would handle work for Company X?
A) Company X has excess capacity.
B) Fixed costs for the work are high, and Company X has large volumes of work.
C) Company X is inexperienced in outsourcing work.
D) Fixed costs for the work are high, and Company X has small volumes of work.
Q4) Explain how franchising agreements differ from licensing agreements.
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Chapter 15: The Organization of International Business
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Q1) Adopting a market control system requires that the MNE uses external market mechanisms to establish internal performance benchmarks and standards.
A)True
B)False
Q2) The benefits of managerial visits to foreign subsidiaries can easily be replicated with frequently submitted and reviewed operational reports and schedules.
A)True
B)False
Q3) Market-share increase and turnover ratios are examples of ________.
A) nonfinancial evaluation metrics
B) financial evaluation metrics
C) cost and accounting metrics
D) enterprise resource planning (ERP)
Q4) A major benefit of the international division structure is ________.
A) outsourcing distribution and shipping tasks
B) responding quickly to foreign events
C) diversifying most product groups
D) hiring low-cost, local workers
Q5) Describe how an MNE might use reports as a control mechanism.
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Chapter 16: Marketing Globally
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Q1) A company would most likely use gap analysis to ________.
A) estimate market potential over a business cycle
B) compare sales over time
C) compare consumption potential with its own sales
D) determine the best market niches to target
Q2) All of the following are true about passive exports EXCEPT that ________.
A) companies adapt their products very little to foreign consumer preferences
B) companies frequently export only if they have excess capacity
C) companies generally quote higher prices on exports than on domestic sales
D) they refer to the filling of unsolicited requests from abroad
Q3) In a short essay,discuss the international application of five common marketing orientations.
Q4) International marketing is unlike domestic marketing because the basic principles are completely different.
A)True
B)False
Q5) In a production orientation,a company focuses on efficiency and product quality when selling abroad.
A)True
B)False
18
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Chapter 17: Global Manufacturing and Supply Chain Management
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Q1) Which of the following is one of the four phases of purchasing globalization?
A) foreign buying as a part of procurement strategy
B) complete rejection of domestic purchasing
C) foreign buying based on want
D) global purchasing only
Q2) Rationalization is the process of specializing in manufacturing according to product or process.
A)True
B)False
Q3) Describe total quality management.
Q4) A current sourcing dilemma that some companies face is whether or not they should ________.
A) use outsourcing as a reward to underperforming employees
B) make critical components for which they have competencies
C) outsource innovative processes
D) measure supplier performance
Q5) When firms estimate the costs of outsourcing to low-wage countries,they often overlook elements such as shipping distances.
A)True
B)False
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Chapter 18: International Accounting Issues
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Q1) Assume a U.S. company sells merchandise to a French customer for $200,000 when the exchange rate is $1.5 per euro. At the end of the month,the euro is trading at 1.47,and in the middle of the next month when payment is received,the exchange rate is 1.53. If the U.S. company receives payment in dollars,what is the value of the sale at the end of the month for the U.S. company?
A) $200,000
B) $294,000
C) $300,000
D) $306,000
Q2) What metrics are used to measure the performance of an MNE? How is the balanced scorecard approach unique?
Q3) How do exchange rates affect budgets used to evaluate performance in MNEs?
Q4) What is the role of the controller in an MNE? What are some of the challenges that a controller faces in an international environment?
Q5) What is the LEAST likely reason that MNEs set arbitrary transfer prices?
A) take advantage of tax differences between countries
B) achieve economies of scale on a global level
C) circumvent national controls
D) manipulate profits
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Chapter 19: The Multinational Finance Function
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Q1) A translation exposure arises because the dollar value of the exposed asset changes as the exchange rate changes.
A)True
B)False
Q2) Multilateral netting in global cash management is best described as ________.
A) establishing a safety net so companies don't run out of cash
B) coordinating cash inflows and outflows among subsidiaries
C) transferring currencies among subsidiaries to exhibit transparency
D) transferring funds in the absence of a good cash budget or loan arrangement
Q3) A city or country that provides large amounts of funds in currencies other than its own is a(n)________.
A) offshore financial center
B) ADR facilitator
C) interbank market
D) currency regulator
Q4) A French company floating a bond issued in Swiss francs in Switzerland would be selling a foreign bond.
A)True
B)False
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Chapter 20: International Human Resources
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Q1) Today,most expatriate assignments are for ________.
A) less than one year
B) one to three years
C) three to five years
D) five to ten years
Q2) Generally,HRM does not emphasize which of the following characteristics when evaluating the adaptiveness of an expatriate candidate?
A) self maintenance
B) technology skills
C) cultural empathy
D) sensitivity to host environments
Q3) According to research,expatriates posted to ________ encounter the greatest difficulty in finding accommodations,locating health care,and setting up finances.
A) Australia
B) Saudi Arabia
C) Thailand
D) South Africa
Q4) What are the current trends in expatriate allowances? What are the reasons for these changes?
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