International Marketing, 18e (Cateora)
Chapter 2 The Dynamic Environment of International Trade
1) The Marshall Plan was developed by the United States as a method to assist Europe in
rebuilding after World War II.
2) The GATT became part of the World Trade Organization in 1995 with the ratification of the
Uruguay Round agreements.
3) The United States faced decreasing competition in export markets beginning in 1970 with the
ending of the Vietnam War.
4) By the year 1971, the United States was selling less to other countries than it bought from
them; that is, the United States had a trade deficit.
5) The Organization for Economic Cooperation and Development (OECD) estimates that the
economies of the developed world will expand at much faster rates when compared to the
developing economies.
6) A nation’s balance-of-payments statement records all financial transactions between its
residents and those of the rest of the world during a given period of time.
7) In a balance-of-payments record, the current account is a record of direct investment, portfolio
investment, and short-term capital movements to and from countries.
8) When reviewing a balance-of-payments statement, you would check the reserves account to
view exports and imports of gold.
9) When foreign currencies can be traded for more dollars, U.S. products and companies are
more expensive for the foreign customer and exports decrease.
10) Establishing a tariff on fabrics imported from Uruguay so that U.S. manufacturers sell more
fabrics is an example of a protectionist measure.
11) In general, economists do not recognize “protection of the home market” as a valid argument
for protectionist measures.
12) Quotas, boycotts, monetary barriers, and market barriers are examples of tariff barriers.
13) In general, a tariff will decrease inflationary pressures.
14) Tariffs are often used as reprisals against protectionist moves of trading partners.
15) The United States has placed a limit on the tons of sugar that can be imported into the
country. This is an example of a tariff.
16) An import license limits the quantities that can be imported on a case-by-case basis.
17) Voluntary export restraints are common in the agricultural industry when an agreement is
made between the importing and exporting countries for a restriction on the volume of exports.
18) An embargo sets a limit on the quantity of goods one country can sell to another.
19) In the context of blocked currency, blockage is accomplished by refusing to allow an
importer to exchange its national currency for the currency of the seller.
20) It is mandatory for importers who want to buy a foreign good from a foreign country to apply
for a business permit in that country.
21) An exchange permit issued by a government can stipulate an unfavorable rate of exchange
depending on the desires of the government.
22) The United States and other countries require some products to contain a percentage of “local
content” to gain admission to their markets.
23) Antidumping laws encourage foreign producers to sell their products at a higher cost than the
cost of production and create more opportunities for free trade.
24) The Omnibus Trade and Competitiveness Act of 1988 focuses on assisting businesses to be
more competitive in world markets, but does not get involved in trade practices.
25) Under the Omnibus Trade and Competitiveness Act, the U.S. president has the authority to
restrict sales of a country’s products in the U.S. market if that country imposes unfair restrictions
on U.S. products.
26) One advantage of the Omnibus Trade and Competitiveness Act is a more flexible process to
obtain export licenses.
27) The GATT panels were formed to resolve bilateral trade disputes and have both advisory and
enforcement powers.
28) The decisions taken by the World Trade Organization in solving trade disputes among
members are binding ones.
29) The International Monetary Fund was created before World War II to help individual states
regain economic profitability.
30) As both special drawing rights (SDRs) and the U.S. dollar have lost their utility as the basic
medium of financial exchange, most monetary statistics relate to gold and silver rather than
dollars.
31) After World War II, the United States led efforts to provide financial and industrial
development assistance to rebuild Japan and channeled funds to foster economic growth in the
underdeveloped world. These efforts were primarily aimed at
A) halting the growth of Nazi Germany.
B) dampening the spread of communism.
C) dampening the spread of capitalism.
D) building a stronger defense force.
E) creating a worldwide trade bloc to counter the OPEC countries’ clout.
32) After World War II, the United States set out to infuse the ideal of capitalism throughout as
much of the world as possible. As a result, most of the noncommunist economies in the world
A) stagnated.
B) grew significantly.
C) failed.
D) quickly matched the U.S. economy.
E) faced high inflation rates.
33) What was the most apparent reciprocal impact of the foreign economic assistance given by
the United States following World War II?
A) European countries formed an alliance to counter the OPEC countries’ clout.
B) Outflow of labor to the recipient countries increased dramatically.
C) All recipient countries appointed Americans to manage their central banks.
D) Purchases of U.S. agricultural products, manufactured goods, and services by the recipient
countries increased.
E) Distribution of economic power and potential became more uneven.
34) What factor was primarily responsible for the excess in production capacity in the United
States after World War II?
A) The United States government raised the tariffs on most imports by 60%.
B) Many firms from other nations shifted their production facilities to the United States.
C) Domestic demand was at a historic low and resulted in excess capacity.
D) The returning military after World War II increased the labor supply in the United States.
E) The implementation of the Marshall Plan dampened the overseas demand.
35) How did GATT prevent the repeat of the economic disaster that occurred after World War I?
A) It provided short-term loans to struggling nations.
B) It promoted dumping policies to allow stronger ties between member nations.
C) It fostered isolationism for nations that were market leaders.
D) It provided for a third party, the United Nations, to negotiate peace treaties.
E) It provided a forum for member countries to negotiate a reduction of tariffs and other barriers
to trade.
36) Why did the Smoot-Hawley Act play a role in sending the world’s economies into the Great
Depression?
A) It encouraged the majority of world economies to lower tariffs to imported goods.
B) It raised U.S. tariffs on thousands of imported goods by more than 60 percent.
C) It created an embargo on all agricultural products.
D) It divided the United States into factions based on race.
E) It forced independent countries to band together to stay economically viable.
37) What was the outcome for GATT after the ratification of the Uruguay Round agreements?
A) GATT allowed the United States to increase its import tax.
B) GATT became part of the World Trade Organization.
C) GATT directly led to the uneven distribution of economic power and potential.
D) The European Union decided to stay away from the treaty.
E) The original purpose was sidelined in favor of political and military intervention between
member states.
38) The rapid growth of war-torn economies and previously underdeveloped countries, coupled
with large-scale economic cooperation and assistance that followed World War II, led to
A) the rise of new global marketing opportunities.
B) the decrease in demand for American goods worldwide.
C) the dissolution of GATT.
D) the spread of communism by the United States.
E) the sharp reduction in the production capacity of the United States.
39) Which were the two major challenges faced by U.S. multinational corporations at the close
of the 1960s?
A) the creation of the Soviet Union and the higher tariffs on imports
B) growing jingoistic nationalism and a negative population growth rate in major international
markets
C) resistance to direct investment and increasing competition in export markets
D) increasing Chinese domination in the manufacturing sector and the falling dollar in global
markets
E) the decreased demand for U.S. goods in the global market and the growing influence of
consumer rights advocacy in the home market
40) Post-World War II, worldwide economic growth was in strong evidence and countries that
were once classified as less developed were reclassified as
A) communist countries.
B) free trade economies.
C) tier-II countries.
D) developed countries.
E) newly industrialized countries.
41) Which statement presents the correct picture of the outcome of increased world trade after
the 1950s, contrary to Servan-Schreiber’s prediction?
A) Third World countries have been excluded from this economic growth leading to stark
imbalances in wealth.
B) The European Union has become the center of world trade, taking the position away from the
United States.
C) The United States has continuously maintained the positive balance of trade it attained during
the 1950s.
D) Economic power and potential has become more evenly distributed among the countries of
the world.
E) SDRs and gold have lost their utility as the basic medium of financial exchange and most
monetary statistics have started relating to the U.S. dollar.
42) What is the major reason behind the failure of American MNCs to completely dominate the
European markets as predicted by Servan-Schreiber?
A) The resurgence of competition for U.S. businesses from all over the world
B) The elimination of import taxes in the European countries
C) The restructuring of U.S industries
D) The decadence of communism
E) The dissolution of colonial powers
43) What strategy was employed by the United States to regain its lost market share for capital
goods by the late 1990s?
A) funding the competitive developing nations
B) restructuring its industries to be more “lean and mean”
C) decreasing its exports and increasing its imports
D) raising average U.S. tariffs on more than 20,000 imported goods by 60 percent
E) provoking increased protectionism from other countries
44) Following World War II, it is noted that the West created the trade patterns. This was
especially true in which one of the following?
A) North America
B) Europe
C) South America
D) Asia
E) Central America
45) In the last few years, most of the countries of the world saw a dramatic slowdown in the
growth of their economies with the exception of
A) the United States.
B) Spain.
C) China.
D) Greece.
E) France.
46) The World Bank estimates that five countries whose share of world trade is barely one-third
that of the European Union will, by 2020, have a 50 percent higher share than that of the
European Union. Which of these countries is included on this list?
A) Canada
B) Nigeria
C) Netherlands
D) Indonesia
E) Zimbabwe
47) The system of accounts that records a nation’s international financial transactions is most
accurately called its
A) supply chain management system.
B) gross domestic product system.
C) net domestic product payments.
D) balance of payments.
E) net national product systems.
48) What is used to ensure that balance-of-payments records are always in balance?
A) sum of squares recording system
B) bank reconciliation system
C) double-entry bookkeeping system
D) archival records system
E) multifactor recording system
49) A balance-of-payments statement for a country reveals
A) how rich or poor a country is financially.
B) a record of the country’s financial condition.
C) a comparison of one country’s finances to another country’s debt.
D) a balanced budget for the country.
E) the spending power available to the country for specific goods.
50) What is a defining characteristic of a balance-of-payments statement?
A) It is a record of the domestic transactions between the government of a country and the
private companies in that country.
B) It records all financial transactions between the residents of a country and those of the rest of
the world.
C) It records the trade policies of the member nations of the WTO.
D) It is an annual record of the profitable foreign transactions made by a particular country.
E) It is a financial statement in which the credits must exceed the debits.