International Business: The Challenges of Globalization, 9e (Wild)
Chapter 4 Economic Development of Nations
1) Which of the following terms refers to the broadest measure of economic development of a
country?
A) gross domestic product (GDP)
B) purchasing power parity (PPP)
C) gross national product (GNP)
D) human development index (HDI)
2) The measure of the value of production that occurs within a country’s borders without regard
to whether the production is done by domestic or foreign factors of production is its ________.
A) net national product (NNP)
B) gross national product (GNP)
C) gross domestic product (GDP)
D) gross national income (GNI)
3) The ________ of a country is its gross national product divided by its population.
A) GNP per capita
B) GDP per capita
C) purchasing power parity
D) purchasing power
4) The relative ability of two countries’ currencies to buy the same basket of goods in those two
countries is called ________.
A) gross national product
B) gross domestic product
C) purchasing power
D) purchasing power parity
5) ________ is the value of goods and services that can be purchased with one unit of a country’s
currency.
A) Potential output
B) Gross national product
C) Purchasing power
D) Gross domestic product
6) Gross national income (GNI), the broadest measure of economic activity for a country, is
defined as the ________.
A) total of all consumption and investment that takes place in a national economy
B) income generated in one country, regardless of who owns the productive assets
C) total of all economic activity in one country less services, such as government administration,
health services, and education
D) income generated by both total domestic production and the international production
activities of national companies
7) Which of the following terms is used to refer to the exchange of goods and services for other
goods and services instead of money?
A) fiat money
B) letter of credit
C) barter
D) guanxi
8) The GDP per capita of a country is lower than that of France. If the GDP per capita of the
country is adjusted for PPP, the country’s revised GDP is higher than that of France. Which of
the following is most likely true about the country?
A) The cost of living in the country is higher than that of France.
B) The cost of living in the country is lower than that of France.
C) The cost of living in the country is approximately equal to that of France.
D) The cost of living in the country has increased over the past decade.
9) The GDP per capita of a country is higher than that of Thailand. If the GDP per capita of the
country is adjusted for PPP, the country’s revised GDP is lower than that of Thailand. Which of
the following is most likely true about the country?
A) There are fewer goods available for purchase in the country than in Thailand.
B) The cost to buy everyday goods in the country is approximately the same as in Thailand.
C) It costs less to buy everyday goods in the country than in Thailand.
D) It costs more to buy everyday goods in the country than in Thailand.
10) Which of the following measures the extent to which a government equitably provides its
people with a long and healthy life, an education, and a decent standard of living?
A) category development index
B) gross national product index
C) human development index
D) purchasing power index
11) A company is conducting a research on new markets by comparing countries in terms of
their human development index (HDI) scores. The company wishes to expand into a market
where individuals experience a very high level of total well-being. Which of the following
countries would the company most likely choose?
A) Russia
B) Mexico
C) China
D) Japan
12) Which of the following is true about economic development of a nation?
A) The purchasing power parity is a poor indicator of a people’s total well-being.
B) GDP is a larger figure and includes a nation’s income generated from exports, imports, and
international operations.
C) Illegal activities such as gambling and black market transactions are considered in GDP and
GNP.
D) Using gross product figures to compare production across countries accounts for different
cost of living in each country.
13) Which of the following statements is true of national production?
A) Marketers use GDP or GNP figures to determine whether a country’s population is wealthy
enough to purchase its products.
B) Per capita numbers provide a detailed picture of development of the entire country.
C) Gross product figures accurately indicate whether a nation’s economy is growing or shrinking.
D) Volunteer work and unpaid household work are considered in GDP and GNP.
14) Nations having the poorest infrastructures and lowest personal incomes are called ________.
A) developed countries
B) newly industrialized countries
C) emerging markets
D) developing countries
15) A country that has recently increased the portion of its national production and exports
derived from industrial operations is called a(n) ________.
A) newly industrialized country (NIC)
B) developing country
C) emerging market
D) developed country
16) Both GDP and GNP measure a nation’s income per person.
17) Volunteer work and unpaid household work are not included in GNP.
18) Barter is an alternative for buyers who lack money needed to pay for exports.
19) The concept of purchasing power parity (PPP) must be applied to understand the true value
of a currency in its home country.
20) The human development index (HDI) demonstrates that high national income alone
guarantees human progress.
21) Nations with the poorest infrastructures and lowest personal incomes are called developing
countries.
22) One of the key obstacles faced by countries in economic transition is the lack of managerial
expertise.
23) How does economic development in countries affect international business?
24) Differentiate between GDP and GNP. Briefly discuss the drawbacks of using GDP and GNP
as indicators of economic development.
25) How are countries classified? Explain with examples.
26) Does greater economic freedom guarantee a higher standard of living? Provide examples of
two specific countries to support your answer.
27) ________ is the process by which a nation changes its fundamental economic organization
and creates new free-market institutions.
A) Central planning
B) Economic transition
C) Industrialization
D) Economic liberalism
28) Which of the following is a major obstacle to economic transition?
A) lack of government support
B) environmental degradation
C) privatization
D) black markets
29) Economic transition is the process of moving from ________.
A) developed to developing economies
B) centrally planned to free-market economies
C) developed to emerging economies
D) free-market to centrally planned economies
30) What is economic transition? Describe the obstacles that countries face during economic
transition.
31) What is privatization? What role does it play in economic transition?
32) Which results in a loss of assets, without compensation?
A) repatriation
B) confiscation
C) expropriation
D) inflation
33) ________ is the forced transfer of assets from a company to the government with
compensation.
A) Expropriation
B) Nationalization
C) Confiscation
D) Localization
34) Which of the following is a disadvantage of local requirement laws to foreign companies?
A) They do not foster local business activity and increase regional and national unemployment.
B) They make it necessary for the government to resort to expropriation and confiscation.
C) The companies are forced to bring in raw material and workers from their own countries.
D) Companies required to hire local personnel might be forced to take on inadequately trained
workers.
35) ________ refers to the transfer of ownership of resources from the private to the public
sector.
A) Nationalization
B) Expropriation
C) Federalization
D) Conversion
36) Had the government taken over (with compensation) the assets of Global Trading but not
those of any other company, the government’s actions would be an example of ________.
A) expropriation
B) nationalization
C) confiscation
D) communism
37) Had the government taken over the assets of Global Trading without compensation, and not
taken over the assets of any other company, the government’s actions would be an example of
________.
A) expropriation
B) nationalization
C) confiscation
D) communism
38) ________ is the chance that political forces may change a country’s business environment in
ways that lead investors to lose some or all of the value of their investment or be forced to accept
a lower-than-projected rate of return.
A) Governmental risk
B) Operating risk
C) Transaction risk
D) Political risk
39) Expropriation is best defined as the ________.
A) transference of ownership of resources from private to public sector with no compensation
B) transference of ownership from private to public sector with compensation to private owners
for their losses
C) conversion of state-owned property to privately owned property
D) conversion of state-owned property to privately owned property with no compensation
40) CADE International has foreign operations in Taiwan, India, and China. The firm pays an
annual insurance premium to the Overseas Private Investment Corporation. The firm is most
likely protecting itself from ________.
A) privatization
B) natural disasters
C) nationalization
D) financial instability
41) Political risk that affects all firms in a country is referred to as ________.
A) micropolitical risk
B) macropolitical risk
C) inclusive political risk
D) exclusive political risk
42) ________ is political risk that affects only a specific firm or firms within a specific industry.
A) Inclusive political risk
B) Exclusive political risk
C) Micropolitical risk
D) Macropolitical risk
43) ________ has one of the highest levels of macropolitical risk.
A) Saudi Arabia
B) Chile
C) Brazil
D) Afghanistan
44) Christopher Electronics plans to expand into foreign markets. Top executives want the firm
to focus only on locations where the rule of law prevails. Which of the following should most
likely be considered by Christopher?
A) wealthier, westernized countries
B) developing, non-Western countries
C) emerging economies experiencing rapid growth
D) countries inclined toward totalitarian-style government
45) Which of the following statements about approaches to political risk management is NOT
true?
A) Passive political risk management discourages managers from fully or partially hedging their
bets against exposure to political hazards.
B) Passive political risk management assumes that it is difficult, if not impossible, to
systematically model political risk.
C) Active political risk management assumes that positive and negative political events in any
country are neither independent nor random events.
D) Active political risk management assumes that political events unfold in observable patterns
that statistical methods can detect.