International Economics Test
Bank
Course Introduction
International Economics examines the flow of goods, services, and capital across national borders and explores the economic interactions between countries. The course covers key topics such as international trade theory, trade policy, exchange rates, balance of payments, and the effects of globalization on national economies. Students analyze how international economic policies and institutions like the World Trade Organization and International Monetary Fund influence global markets, economic growth, and development. Emphasis is placed on understanding contemporary issues such as trade disputes, tariffs, currency crises, and the role of emerging economies in the global marketplace.
Recommended Textbook
International Business Competing in the Global Marketplace 8th Edition by Charles W.
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Page 2
L. Hill
Chapter 1: Globalization
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Sample Questions
Q1) According to supporters of free trade,as countries get richer they enact tougher environmental and labor regulations.
A)True
B)False
Answer: True
Q2) The growing integration of the world economy is:
A)increasing the intensity of competition in a wide range of manufacturing and service industries.
B)decreasing the intensity of competition in manufacturing industries,and increasing the intensity of competition in services.
C)increasing the intensity of competition in manufacturing industries,and decreasing the intensity of competition in services.
D)narrowing the scope of competition in a wide range of service,commodity,and manufacturing industries.
Answer: A
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Chapter 2: National Differences in Political Economy
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Sample Questions
Q1) In all of the following scenarios,the costs of doing business in a country tend to be greater,except where:
A)political payoffs are required to gain market access.
B)supporting infrastructure is lacking.
C)adhering to local laws and regulations is costly.
D)there is a highly developed infrastructural support.
Answer: D
Q2) With regard to political factors,a company may have to pay off politically powerful entities in a country before the government allows it to do business there.
A)True
B)False
Answer: True
Q3) Safety standards to which a product must adhere are set by:
A)safety certifications.
B)the government standards department.
C)product safety laws.
D)product liability laws.
Answer: C
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4
Chapter 3: Differences in Culture
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Sample Questions
Q1) Unspoken language refers to nonverbal communication.
A)True
B)False
Answer: True
Q2) The belief in the superiority of one's own culture is known as:
A)ethnocentrism.
B)egocentrism.
C)polycentrism.
D)theocentricism.
Answer: A
Q3) Several sociologists have argued that of the three main branches of Christianity-Catholic,Orthodox,and Protestant-the latter has the most important economic implications.
A)True
B)False
Answer: True
Q4) There is a one-to-one correspondence between culture and the nation-state.
A)True
B)False
Answer: False
Page 5
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Chapter 4: Ethics in International Business
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Sample Questions
Q1) Facilitating payments are:
A)permitted under the amended Foreign Corrupt Practices Act.
B)a direct violation of the Foreign Corrupt Practices Act.
C)permitted so long as they designed only to gain exclusive preferential treatment.
D)used to secure contracts that would otherwise not be secured.
Q2) According to the _____ approach,the best decisions are those that produce the greatest good for the greatest number of people.
A)naive immoralist
B)Friedman doctrine
C)utilitarian
D)Kantian
Q3) Cultural relativism suggests that:
A)ethics are nothing more than the reflection of culture and that a firm should adopt the ethics of the culture in which it is operating.
B)the only social responsibility of business is to increase profits.
C)managers of a firm should not make decisions regarding social investments.
D)a multinational's home-country standards of ethics are always appropriate to follow in foreign countries.
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Chapter 5: International Trade Theory
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Sample Questions
Q1) Contrary to what the Heckscher-Ohlin theory would predict,the United States has been a primary importer rather than an exporter of capital goods.This phenomenon is referred to as the _____ paradox.
A)zero-sum
B)Leontief
C)empirical
D)Ricardo
Q2) The simple comparative advantage model assumes that trade does not change a country's stock of resources or their utilization efficiency.If we relax this assumption to make allowances for dynamic changes,all of the following become apparent except:
A)opening the economy to trade would be likely to generate dynamic gains.
B)free trade may increase the country's stock of resources.
C)free trade might increase the efficiency with which the country uses its resources.
D)dynamic gains will cause the country's PPF to shift inward.
Q3) Economies of scale are unit cost reductions associated with a large-scale output.
A)True
B)False
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Chapter 6: The Political Economy of International Trade
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Sample Questions
Q1) Explain the notion of predatory behavior with regard to dumping.
Q2) _____ suggests that a government should use subsidies to support promising firms that are active in newly emerging industries.
A)The infant industry argument
B)Strategic trade policy
C)Retaliation policy
D)The national security argument
Q3) Tariffs on industrial goods remain higher than tariffs on services.
A)True
B)False
Q4) Foreign producers typically agree to voluntary export restrictions because:
A)their manufacturing capacity is limited.
B)they can divert their exports to other countries and charge more for their products.
C)they fear far more damaging punitive tariffs or import quotas might follow if they do not.
D)they are required to by the World Trade Organization.
Q5) Explain how trade barriers affect a firm's strategy.
Q6) What are the political reasons for governments to intervene in markets?
Q7) Discuss the establishment of GATT.What was GATT's objective?
Page 8
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Chapter 7: Foreign Direct Investment
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Sample Questions
Q1) Dunning,in the eclectic paradigm theory,suggests that a firm must establish production facilities where foreign assets or resource endowments necessary to the production of the product exist.
A)True
B)False
Q2) Discuss the reasons for the growth in FDI over the last 30 years.
Q3) A current account deficit exists when a country imports more than it exports.
A)True
B)False
Q4) The two most common methods of restricting inward FDI are ownership restraints and performance requirements.
A)True
B)False
Q5) What is franchising? What type of firm uses franchising as a means of expanding into foreign markets?
Q6) Classical economics and the international trade theories of Adam Smith and David Ricardo form the basis for the free market view.
A)True
B)False
Page 9
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Chapter 8: Regional Economic Integration
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Sample Questions
Q1) The _____,adopted by the member nations of the European Community in 1987,committed member countries to work toward the establishment of a single market by December 31,1992.
A)Maastricht Treaty
B)Treaty of Rome
C)Single European Act
D)Delores Commission
Q2) The European Union is an example of a perfect economic union.
A)True
B)False
Q3) The judges of the Court of Justice are required to act as representatives of national interests,rather than as independent officials.
A)True
B)False
Q4) On January 1,1993,_____ moved toward a single market with 340 million consumers.
A)the European Union
B)MERCOSUR
C)the Andean community
D)NAFTA
Q5) How easy is it for countries to integrate?
Page 10
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Chapter 9: The Foreign Exchange Market
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Sample Questions
Q1) Arbitrage opportunities abound in the foreign exchange markets and they tend to be available for long periods of time.
A)True
B)False
Q2) Economic theory suggests that when inflation is expected to be high:
A)interest rates will be low.
B)exchange rates will be high.
C)the International Fisher Effect does not hold.
D)interest rates will be high.
Q3) _____ is most likely to occur when the value of the domestic currency is depreciating rapidly because of hyperinflation or when a country's economic prospects are shaky in other respects.
A)The bandwagon effect
B)The Fisher Effect
C)The International Fisher Effect
D)Capital flight
Q4) Discuss the two schools of thought on exchange rate forecasting.
Q5) Consider the role of investor psychology and bandwagon effects on how well PPP and the International Fisher Effect explain short-term movements in exchange rates.
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Chapter 10: The International Monetary System
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Q1) In 2007,about a quarter of the IMF's members had an exchange rate policy that allowed their currency to float freely.
A)True
B)False
Q2) Many of the world's developing nations peg their currencies,primarily to the dollar or the yen.
A)True
B)False
Q3) In 2006,about a quarter of the IMF members had a(n)_____ exchange rate policy.
A)fixed peg
B)currency board
C)free float
D)adjustable peg
Q4) When the income a country's residents earn from exports is equal to the money its residents pay to other countries for imports,the country is said to:
A)be in current account equilibrium.
B)be in capital account equilibrium.
C)be in balance-of-trade equilibrium.
D)have a managed float.
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Chapter 11: The Global Capital Market
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Sample Questions
Q1) Commercial banks take cash deposits from corporations and individuals and pay them a rate of interest in return.
A)True
B)False
Q2) A eurocurrency is the currency used by the countries of the European Union.
A)True
B)False
Q3) A eurocurrency
A)can be created anywhere in the world.
B)should be created and banked in Europe.
C)can be created only in its country of origin.
D)refers to any former national currency of EU members.
Q4) A debt loan requires a corporation to repay a predetermined portion of the loan amount at regular intervals regardless of how much profit it is making.
A)True
B)False
Q5) What are foreign bonds?
Q6) What are the benefits of a global capital market as compared to a purely domestic capital market?
Page 13
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Chapter 12: The Strategy of International Business
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Sample Questions
Q1) The marketing and sales functions of a firm can help to create value through all of the following ways,except:
A)creating goods and services.
B)brand positioning.
C)advertising.
D)communicating consumer needs to R&D.
Q2) Which of the following is an example of a primary activity in a firm's value chain?
A)Information systems
B)Research and development
C)Logistics
D)Human relations
Q3) _____ activities are basically concerned with creating the product,marketing and delivering the product to buyers,and providing support and after-sales service.
A)Support
B)Subordinate
C)Ancillary
D)Primary
Q4) What is strategy? How does strategy relate to a firm's profitability?
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Chapter 13: The Organization of International Business
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Sample Questions
Q1) These refer to abstract ideas about what a group believes to be good,right,and desirable.
A)Values
B)Norms
C)Thoughts
D)Ideas
Q2) The manner in which decisions are made and work is performed within the organization is known as the firm's:
A)organizational culture.
B)incentives.
C)control systems.
D)processes.
Q3) The emphasis on local responsiveness in firms pursuing a local responsiveness strategy creates strong pressures for:
A)decentralizing all decisions to foreign subsidiaries.
B)decentralizing operating decisions to foreign subsidiaries.
C)centralizing all operating decisions.
D)centralizing all decisions.
Q4) What is a knowledge network? What is the advantage of such a system?
Q5) Explain organizational structure.
15
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Chapter 14: Entry Strategy and Strategic Alliances
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Sample Questions
Q1) A small-scale entrant is more likely than a large-scale entrant to capture first-mover advantages associated with demand preemption,scale economies,and switching costs.
A)True
B)False
Q2) The main advantage of greenfield investment is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants.
A)True
B)False
Q3) If a firm can realize location economies by moving production elsewhere,it should avoid:
A)exporting.
B)turnkey contracts.
C)licensing.
D)wholly owned subsidiaries.
Q4) Relational capital refers to the building of interpersonal relationships between the firms' managers in a strategic alliance.
A)True
B)False
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Chapter 15: Exporting,Importing,and Countertrade
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Sample Questions
Q1) _____ involves trading goods and services for other goods and services when they cannot be traded for money.
A)Countertrade
B)Forfeiting
C)A sight draft
D)A time draft
Q2) Time drafts are negotiable instruments.
A)True
B)False
Q3) Large revenue and profit opportunities are typically available in foreign markets.
A)True
B)False
Q4) Firms use countertrade to trade goods and services for other goods and services when they cannot be traded for money.
A)True
B)False
Q5) Why might a firm avoid countertrade?
Q6) What type of firm is most likely to engage in countertrade? Why?
Q7) Describe the three purposes of a bill of lading.
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Chapter 16: Global Production, Outsourcing, and Logistics
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Sample Questions
Q1) Describe the European Union's efforts to raise product quality.In your opinion,does the effort represent a trade barrier?
Q2) What does Six Sigma refer to?
Q3) When substantial investments in specialized assets are required to manufacture a component,the firm will prefer to contract it out to a supplier.
A)True
B)False
Q4) Production denotes both service and manufacturing activities.
A)True
B)False
Q5) What is mass customization?
Q6) Issues of strategic flexibility and organizational control are greater for purely domestic businesses than for international ones.
A)True
B)False
Q7) Explain how the concept of production efficiency has changed with the rise of flexible manufacturing technologies.
Q8) Who was W.Edward Deming? What is his contribution to business?
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Chapter 17: Global Marketing and RD
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Sample Questions
Q1) The extent to which the place of manufacturing influences product evaluations is known as:
A)source effects.
B)country of origin effects.
C)noise effects.
D)location effects.
Q2) To overcome cultural barriers,companies should:
A)develop products specifically for each market.
B)focus on universal needs.
C)focus only on market segments that transcend national boundaries.
D)develop cross-cultural literacy.
Q3) Which of the following statements is false?
A)The lesser the number of competitors,the higher the elasticity of demand.
B)When competitors are limited,consumers' bargaining power is weaker.
C)A firm may charge a higher price for its product in a country where competition is limited than in one where competition is intense.
D)When there is high elasticity of demand and a firm raises its prices above those of its competitors,consumers will switch to the competitors' products.
Q4) Define market segmentation.What is its goal?
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Chapter 18: Global Human Resource Management
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Sample Questions
Q1) Many Japanese firms prefer expatriate Japanese managers to head their foreign operations because these managers have been socialized into the firm's culture while employed in Japan.This implies that:
A)the firm may believe that such managers cannot progress beyond senior positions in their parent company.
B)the firm may see an ethnocentric staffing policy as the best way to maintain a unified corporate culture.
C)the firm is trying to create value by transferring core competencies to a foreign operation.
D)the firm requires host-country nationals to be recruited to manage subsidiaries.
Q2) An executive who performs well in a domestic setting will be able to adapt to managing in a different cultural setting.
A)True
B)False
Q3) Cultural toughness can be assessed by comparing cultures.
A)True
B)False
Q4) Discuss the concerns of organized labor.
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Chapter 19: Accounting in the International Business
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Sample Questions
Q1) EU directives have the power of law and so it can be assumed that the EU has a better chance of harmonizing accounting standards than the IASB.
A)True
B)False
Q2) Since banks are the major providers of capital in countries like Germany,financial accounting practices involve overvaluing assets and valuing liabilities conservatively.
A)True
B)False
Q3) An investor based in the Middle East buying Exxon Mobil Corporation stock through the New York Stock Exchange would be an example of transnational financing.
A)True
B)False
Q4) Foreign subsidiaries of multinational firms normally keep their accounting records and prepare their financial statements in US dollars.
A)True
B)False
Q5) Describe the Lessard-Lorange Model.
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Chapter 20: Financial Management in the International Business
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Sample Questions
Q1) What are fronting loans? Why are they used by multinationals?
Q2) Empirical studies show that there is a long-run relationship between a country's relative inflation rates and changes in exchange rates.
A)True
B)False
Q3) Why do firms prefer to hold cash balances at a centralized depository?
Q4) U.S.regulations tax U.S.shareholders on the firm's overseas income when it is earned,regardless of when the parent company in the United States receives it.
A)True
B)False
Q5) In practice,the biggest problem arising from economic mismanagement has been rising interest rates.
A)True
B)False
Q6) Adjusting discount rates to reflect a location's riskiness:
A)is not widely practiced by firms.
B)treats all risk as a single problem.
C)penalizes distant cash flows too heavily.
D)does not penalize early cash flows enough.
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