Chapter 03 – Doing Business in Global Markets
Casey is typical of many U.S. businesspeople. Casey feels the U.S. culture defines the
model for the rest of the world, and that the “American way” of doing things is the best.
Casey is guilty of:
A. ethnic plagiarism.
B. ethnocentricity.
C. culture shock.
D. counter culture.
Feedback: Ethnocentricity is the feeling that one’s own culture is superior to all others.
291. In order to level the playing field in trade between the U.S. and China, U.S.
policymakers have called upon China’s government to allow the Yuan (China’s currency)
to float freely, as other world currencies. Through government regulation, China
maintains an undervalued currency, which results in:
A. More buying power for Chinese consumers who want to purchase U.S. goods and
goods from other countries.
B. Maintaining robust Chinese exports and a favorable balance of trade for China.
C. Developing better relations with industrialized countries who want to increase the value
of their exports.
D. Stability and strength of the Chinese Yuan against the U.S. dollar and the euro.
Feedback: A favorable balance of trade exists when a country exports a greater value of
goods than it imports. By keeping the Yuan undervalued compared to other currencies,
China makes it more appealing for other countries to purchase its products, and less appealing
for its markets to purchase imported goods.
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324.
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The impetus behind trade protectionism is:
A. to limit accelerated growth of GDP, that would cause inflation to escalate.
B. to facilitate the belief that it will keep one’s nation disease free.
C. to increase the positive economic consequences of one’s trade position.
D. solely for the protection of nuclear attack.
Feedback: Trade protectionism is the use of government regulations to limit the import of
goods and services. Those in favor of trade protectionism believe that helps domestic
companies survive (including job survival at these firms) and grow.
325. Although embargos are enacted upon both imports and exports, this form of trade
protectionism is often the result of:
A. physical and environmental limitations on trade.
B. non-tariff barriers.
C. currency fluctuations.
D. political disagreements between nations.
Feedback: An embargo is a complete ban on the import or export of certain products; or, the
stopping of all trade with a specific country. This action is often caused by geo-political
disagreements between nations. The two parties in question disagree on fundamental political,
sociological, and/or philosophical beliefs and values. Students are usually familiar with the
U.S. embargo against Cuba, in effect since 1962.
326.
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The benefits of protective tariffs are:
A. they increase the revenues of the government that has implemented them.
B. they decrease the cost of the product to the consumer (end-user).
C. they help develop friendlier trade relations with loyal trading partners. Both parties are
protected.
D. they protect domestic jobs by encouraging cost sensitive consumers to purchase
domestic products.
Feedback: Protective tariffs raise the retail price of imported goods. This provides domestic
companies an opportunity to price their products competitively. The domestic companies have
more opportunity to keep costs down and grow, prosper, and eventually hire more people.
327. The U.S. government continues to be committed to free-trade agreements, as
evidenced by the more recent passage of CAFTA. The future goal of U.S. free trade
advocates is:
A. A goal to make South and Central American nations the textile hubs of the world,
while U.S. focuses on the advancement of services.
B. A large free trade area that would include all nations of South and North America.
C. Unmonitored free trade across all international borders.
D. Standardized import quotas among participating nations.
Feedback: CAFTA represents the Central American Free Trade Agreement. Free Trade
advocates are lobbying for FTAA (Free Trade Area of the Americas) which would create a
trading bloc or free trade area among all North and South American nations.
328.
Chapter 03 – Doing Business in Global Markets
U.S. firms that produce sophisticated military hardware are prohibited from exporting that
equipment to “unfriendly” governments, such as Iran. This complete ban on exporting
sensitive technology to specific countries is an example of a(n):
A. import quota.
B. boycott.
C. tariff.
D. embargo.
Feedback: An embargo is a complete ban on the import or export of certain products.
329. The U.S. and China (no. 1 and no. 2 global powers) continue to spar over sociocultural
issues, such as human rights, and economic and financial issues, such as the value of the
Chinese Yuan against the U.S. dollar. U.S. diplomats complain that these differences
continue to bolster China’s favorable balance of trade and increase the U.S. trade deficit.
The trade protectionist policy exhibited by the Chinese is similar to an economic policy
known as ____________ that was followed during the 17th and 18th centuries. This
policy resulted in a flow of money to the country that sold the most globally.
A. trade embargoing
B. countertrading
C. profiteering
D. mercantilism
Feedback: Mercantilism: a trade policy first practiced in the 17th century increased trade
protectionism and encouraged nations to import fewer goods than they exported. Nations
focused on strategies to this end.
