International Finance Study
Guide Questions
Course Introduction
International Finance explores the financial complexities of conducting business across national borders. The course covers topics such as foreign exchange markets, international monetary systems, balance of payments, exchange rate determination, risk management, international financial institutions, and investment flows. Students will gain a comprehensive understanding of how global events impact exchange rates, capital mobility, and economic policies, equipping them with the analytical tools necessary to assess and manage financial risks and opportunities in a global context.
Recommended Textbook
Global Business Today 10th Edition by Charles W. L. Hill Dr
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17 Chapters
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Chapter 1: Globalization
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Sample Questions
Q1) Due to the changing economic geography,many of tomorrow's economic opportunities are most likely to be found in the
A)rich industrialized nations of the world like Great Britain and Germany.
B)centrally planned economies of the communist world.
C)United States.
D)developing nations of the world such as China,India,and Brazil.
E)countries that are currently not members of the World Trade Organization.
Answer: D
Q2) ABC Toys,a U.S.-based toy manufacturer,has set up a manufacturing plant in Hong Kong.This is an example of
A)foreign direct investment.
B)international trade.
C)exporting.
D)global rivalry.
E)the globalization of markets.
Answer: A
Q3) The Uruguay Round extended GATT to cover services as well as manufactured goods.
A)True
B)False
Answer: True
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Chapter 2: National Differences in Political, Economic, and Legal Systems
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Q1) In a pure command economy,the goods and services that a country produces,the quantity in which they are produced,and the prices at which they are sold are all dictated by the interaction of demand and supply.
A)True
B)False
Answer: False
Q2) What are grease payments? Are they acceptable by the U.S.law and OECD convention?
Answer: Grease payments are facilitating or expediting payments,the purpose of which is to expedite or to secure the performance of a routine governmental action.For example,they allow for small payments made to speed up the issuance of permits or licenses,process paperwork,or just get vegetables off the dock and on their way to market.Both the U.S.law and OECD convention consider them acceptable.The explanation for this exception to general antibribery provisions is that while grease payments are,technically,bribes,they are distinguishable from (and,apparently,less offensive than)bribes used to obtain or maintain business because they merely facilitate performance of duties that the recipients are already obligated to perform.
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Page 4
Chapter 3: National Differences in Economic Development
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Q1) Economists who argue that innovation and entrepreneurial activity are the engines of long-run economic growth,define innovation broadly to include not just new products but also new processes,new organizations,new management practices,and new strategies.
A)True
B)False
Answer: True
Q2) You can adjust GNI per capita by purchasing power to account for differences in the A)cost of living.
B)population density.
C)geographical area.
D)factor endowments.
E)labor productivity.
Answer: A
Q3) During the late 1980s and early 1990s,totalitarian governments collapsed and were replaced by democratically elected governments.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Differences in Culture
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Q1) One of the downsides to the emphasis on individualism is that it
A)is difficult to build teams within an organization to perform collective tasks.
B)does not support entrepreneurship and innovation.
C)discourages managerial mobility.
D)fails to foster general managerial skills required to find solutions to current problems.
E)discourages competition among employees within a company.
Q2) A person seeking and receiving help through a guanxi network is
A)liable to a social sanction if he or she does not reciprocate when called upon.
B)considered to be disloyal to his or her superiors.
C)free from reciprocal obligations.
D)not a follower of Confucian ethics.
E)hesitant to commit to cooperative ventures.
Q3) According to the World Values Survey,as countries get richer,a shift occurs away from "traditional values" linked to religion,family,and country,and toward "secular rational" values.
A)True
B)False
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Chapter 5: Ethics, Corporate Social Responsibility, and Sustainability
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Sample Questions
Q1) What are grease payments?
Q2) Adoption of which of the following ethical approaches is most likely to cause a company to use tools such as cost-benefit analysis and risk assessment to weigh all of the social benefits and costs of a business action?
A)naive immoralism
B)Friedman doctrine
C)ethnocentrism
D)utilitarianism
E)righteous moralism
Q3) Based on Hofstede's cultural dimensions,enterprises headquartered in a country which scores high on masculinity and power distance measures are more likely to behave ethically than enterprises headquartered in a culture where individualism and uncertainty avoidance are strong.
A)True
B)False
Q4) "Facilitating payments" are payments to secure contracts that would not otherwise be secured.
A)True
B)False
Page 7
Chapter 6: International Trade Theory
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Q1) One of the suggestions of new trade theory is that
A)differences in technology leads to differences in productivity,which in turn,drives international trade patterns.
B)nations may benefit from trade irrespective of resource endowments or technology.
C)the demand for most new products tends to be based on nonprice factors.
D)globally dispersed production reduces the production costs of mature products.
E)comparative advantage does not arrive from a difference in factor endowments but from a difference in productivity.
Q2) Which of the following suggests that trade is a positive-sum game in which all participating countries fetch economic gains?
A)Heckscher-Ohlin theory
B)mercantilism
C)comparative advantage
D)Leontief's paradox
E)Samuelson critique
Q3) Briefly explain how demand conditions shape the environment in which local firms compete.
Q4) Briefly describe new trade theory.
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Page 8
Chapter 7: Government Policy and International Trade
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Q1) Paul Krugman argues that although strategic trade policy looks unappealing in theory,in practice it is most likely to be workable.
A)True
B)False
Q2) Which of the following is the most common political argument for government intervention in international trade?
A)decreasing the prices of products in the domestic market
B)promoting strategic trade policy
C)protecting jobs and industries from unfair foreign competition
D)improving efficiency of domestic labor
E)protecting human rights
Q3) Which of the following specifies that U.S.government agencies must give preference to U.S.products when putting contracts for equipment out to bid unless the foreign products have a significant price advantage?
A)Export Administration Act
B)Helms-Burton Act
C)Hawley-Burton Act
D)Buy America Act
E)Volcker Rule
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Page 9
Chapter 8: Foreign Direct Investment
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Q1) Many host countries are concerned that a foreign-owned manufacturing plant may import many components from its home country,which has negative implications for the host country's
A)free trade agreements.
B)inward FDI.
C)sovereignty.
D)balance-of-payments position.
E)gold reserves.
Q2) Silicon Valley in California is the world center for the computer and semiconductor industry and has many of the world's major computer and semiconductor companies located close to each other,thus offering the location-specific advantage of A)a multipoint competition.
B)an oligopoly.
C)a first mover.
D)externalities.
E)free riders.
Q3) In the context of the internalization theory,explain why licensing may not be an attractive option.
Q4) Describe the role of the WTO in the liberalization of FDI.
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Chapter 9: Regional Economic Integration
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Q1) Which of the following is the reason that Great Britain,Denmark,and Sweden have stayed out of the euro zone?
A)dollar peg advocated by some members of the European Union
B)implied loss of national sovereignty to the European Central Bank
C)volatility of the euro
D)reluctance to compete directly against the U.S.dollar
E)reluctance to be considered an optimal currency area
Q2) The agreement of the member-states of the Central American Common Market joined by the Dominican Republic to trade freely with the United States is known as the
A)Central American Free Trade Agreement.
B)Central American Common Market.
C)Free Trade Area of the Americas.
D)CARICOM.
E)Caribbean Single Market and Economy.
Q3) Briefly describe the European Council.
Q4) What are the two political factors that led to the creation of the European Union?
Q5) Describe the drawbacks of the euro.
Q6) Briefly describe the concept of regional economic integration.
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Chapter 10: The Foreign Exchange Market
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Sample Questions
Q1) What is the Fisher effect?
Q2) In terms of foreign exchange,which of the following observations is true of leading and lagging strategies?
A)They are easy to implement.
B)They primarily protect long-term cash flows from adverse changes in exchange rates.
C)Firms need minimal bargaining power to implement them.
D)They can put pressure on a weak currency.
E)They accelerate payments from strong-currency to weak-currency countries.
Q3) Economic exposure,a category of foreign exchange risk,is distinct from transaction exposure,which is concerned with the effect of exchange rate changes on individual transactions,most of which are short-term affairs that will be executed within a few weeks or months.
A)True
B)False
Q4) If the law of one price were true for all goods and services,the purchasing power parity (PPP)exchange rate could be found from any individual set of prices.
A)True
B)False
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Page 12
Chapter 11: The International Monetary System
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Sample Questions
Q1) Many of the world's developing nations peg their currencies,primarily to the A)U.S.dollar.
B)Saudi riyal.
C)Japanese yen.
D)Chinese yuan.
E)German deutsche mark.
Q2) When the Bretton Woods participants established the World Bank,the need to lend money to third-world nations was foremost in their minds.
A)True
B)False
Q3) The forward exchange market is an accurate predictor of future exchange rates.
A)True
B)False
Q4) Which of the following was abandoned as per the Jamaica agreement of 1976?
A)floating exchange rate system
B)U.S.dollar as the reference currency
C)gold as a reserve asset
D)membership to the International Monetary Fund
E)granting International Monetary Fund loans to less developed countries
Q5) Describe the gold standard and a balance-of-trade equilibrium.
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Chapter 12: The Strategy of International Business
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Sample Questions
Q1) Describe the localization strategy.
Q2) Firms that pursue a(n)_____ strategy focus on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale,learning effects,and location economies.
A)international
B)transnational
C)localization
D)global standardization
E)nationalization
Q3) Describe the global standardization strategy.
Q4) Which of the following strategies is most likely to be pursued by a firm when there are strong pressures for cost reductions and demands for local responsiveness are minimal?
A)domestic strategy
B)global standardization strategy
C)international strategy
D)transnational strategy
E)nationalization strategy
Q5) What are the advantages of strategic alliances?
Q6) What are strategic alliances?
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Chapter 13: Entering Foreign Markets
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Sample Questions
Q1) Omega,Inc.,a maker of personal fitness trackers (like Fitbit)was the first mover into the country of Malnesia.As the first mover in a new product area,Omega,Inc.had to spend a lot of money educating the population of Malnesia about fitness and tracking one's fitness.In addition,they also had to spend money in developing a distribution channel.The costs that Omega,Inc.incurred in Malnesia as the first mover are called A)retail costs.
B)competitive costs.
C)greenfield costs.
D)pioneering costs.
E)moving costs.
Q2) Which of the following is an example of a first-mover advantage?
A)ability to create switching costs that tie customers into one's products or services
B)avoidance of pioneering costs that a later entrant into the foreign market has to bear
C)increased probability of surviving in a foreign market
D)opportunity to observe and learn from the mistakes of other entrants
E)ability to let later entrants ride ahead on the experience curve
Q3) What is a wholly owned subsidiary? List its advantages.
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Page 15
Chapter 14: Exporting, Importing, and Countertrade
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Q1) A firm builds a plant in a country and agrees to take a certain percentage of the plant's output as partial payment for the contract.This type of countertrade is called a(n) A)counterpurchase.
B)offset.
C)switch trade.
D)buyback.
E)barter.
Q2) The principle of countertrade is to trade goods and services for money. A)True
B)False
Q3) Omar Arroyo,an international trade attorney,provides free consultations to small businesses on export-related matters as part of a nationwide group coordinated by the Small Business Association.Omar is a member of the group called the A)TradeNet Export Advisor.
B)Export Trade Assistance Partnership.
C)United States Trade Service.
D)Export Legal Assistance Network.
E)Ex-Im Network.
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Chapter 15: Global Production and Supply Chain Management
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Sample Questions
Q1) Which of the following is a result of using just-in-time inventory systems?
A)It slows down inventory turnover.
B)It increases inventory holding costs.
C)It increases the amount of working capital a firm needs.
D)It can help firms improve product quality.
E)It does not allow defective inputs to be spotted immediately.
Q2) Define minimum efficient scale of output.How does this influence the location decisions of production activities?
Q3) The drawback of a just-in-time inventory system is that it
A)increases the total capital required by a firm.
B)leaves a firm without a buffer stock of inventory.
C)increases inventory holding costs,such as warehousing and storage costs.
D)is less efficient than traditional system in spotting and fixing defective inputs.
E)lowers a company's profitability as measured by return on capital invested.
Q4) The drawback of a just-in-time inventory system is that it leaves a firm with excess unsold inventory that it has to write off against earnings or price low to sell.
A)True
B)False
Page 17
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Chapter 16: Global Marketing and Research and Development
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Q1) A measure of the responsiveness of demand for a product to changes in price is known as
A)the demand to price ratio.
B)demand and price dynamics.
C)price-demand rigidity.
D)demand function of pricing.
E)price elasticity of demand.
Q2) Which of the following is true of multipoint pricing?
A)It involves aggressive pricing in one market to elicit a competitive response from a rival in another market.
B)It involves a firm pricing its products at a loss in order to drive out competitors from the market.
C)It involves buying products at a cheaper rate in one country and selling those at a higher price in another country.
D)It involves allowing markets to determine the pricing of a product.
E)It involves pricing two similar products at low and high prices in order to boost sales of the lower priced products.
Q3) Discuss the arguments for and against standardized advertising.
Q4) Briefly describe market segmentation.
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Chapter 17: Global Human Resource Management
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Sample Questions
Q1) In the context of international labor relations,one of the reasons for a decline in union influence is the
A)introduction of a reciprocal tax treaty.
B)retention of low-skilled tasks in an international firm's home country.
C)importing of employment practices and contractual agreements that are alien to the host country.
D)increased bargaining power of organized labor.
E)increased ability to threaten to disrupt production,either by a strike or some other form of work protest.
Q2) Which of the following staffing policies is followed by firms that can reduce the issue of compensation to that of how much home-country expatriates should be paid?
A)polycentric
B)ethnocentric
C)geocentric
D)international
E)global
Q3) How has organized labor responded to the increased bargaining power of multinational corporations?
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