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Student name:__________
TRUE/FALSE – Write ‘T’ if the statement is true and ‘F’ if the statement is false.
1) The economic forces associated with the external environment are considered one of the
most controllable forces.
⊚ true
⊚ false
2) The International Monetary Fund is a source of economic data that analysts can access to
assess economic conditions.
⊚ true
⊚ false
3) The purpose of economic analysis is to assess the overall outlook of the economy and the
impact of economic changes on the firm.
⊚ true
⊚ false
4) The international environment includes all the uncontrollable forces originating outside
the home country that surround and influence the firm.
⊚ true
⊚ false
5) International economic analyses should provide economic data on both actual and
prospective markets.
⊚ true
⊚ false
6) A common basis for assessing economic development is gross domestic income.
⊚ true
⊚ false
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7) Developed is the term given to nations that have achieved high income per capita.
⊚ true
⊚ false
8) Economies with per capita incomes in the low to middle range that are in a transition
toward developed status are referred to as emerging market economies.
⊚ true
⊚ false
9) To estimate market potential, managers require data on the sizes and rates of change of a
number of economic and socioeconomic factors.
⊚ true
⊚ false
10) To compare the purchasing power of nations, managers need to know among how many
people the gross national income (GNI) is divided.
⊚ true
⊚ false
11) Generally, it can be assumed, the higher the GNI/capita value, the more advanced the
nation’s economy.
⊚ true
⊚ false
12) Purchasing power parity is a means of adjusting the exchange rates for two currencies so
the currencies have equivalent purchasing power.
⊚ true
⊚ false
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13) Income distribution studies confirm the belief that income is more evenly distributed in
the richer nations.
⊚ true
⊚ false
14) Discretionary income is the amount left after paying taxes.
⊚ true
⊚ false
15) The percentage of household expenditures spent on consumer durables by households in
developing nations is half the percentage spent by consumers in developed nations.
⊚ true
⊚ false
16) Wages tend to vary more widely than hourly compensation because of the differences in
the level of fringe benefits.
⊚ true
⊚ false
17) A business is practicing vertical integration when it receives inputs for its production
processes from outside sources.
⊚ true
⊚ false
18) Analysts know that a country with a large population is always a better market than a
country with fewer people.
⊚ true
⊚ false
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19) The population of developing countries accounts for very little of the world’s total
population.
⊚ true
⊚ false
20) Today, the rural-to-urban shift shows that at least half of the world’s population is living
in cities.
⊚ true
⊚ false
MULTIPLE CHOICE – Choose the one alternative that best completes the statement or
answers the question.
21) According to the book, what is the purpose of economic analyses?
A) to anticipate political developments within and across countries
B) to forecast exchange rates
C) to assess the overall outlook for the economy and the impact of economic changes on
the firm
D) to compare the rate of economic and political change in order to determine financial
variances
22) Economic analyses become more complex when a firm enters overseas markets because
unlike the situation for a company operating domestically,
A) the uncontrollable economic variables must be forecast.
B) management must operate in two new environments, foreign and international.
C) economists know less about foreign exchange rates.
D) analysts must now forecast the values for both socioeconomic and economic
variables.
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23) The ________ includes all the uncontrollable forces originating outside the home country
that surround and influence the firm.
A) foreign environment
B) international environment
C) host country environment
D) global environment
24) The ________ environment includes the interactions between domestic and foreign
environmental forces, or between sets of foreign environmental forces when an affiliate in one
country does business with customers in another.
A) foreign
B) international
C) host country
D) global
25) International economic analyses should
A) provide data to governments regarding a company’s traditional markets.
B) provide economic data on actual and prospective markets.
C) be focused on economic conditions of nations in which a company’s major
competitors are located.
D) rely on published government data for input.
26) Because of the importance of economic information to the control and planning functions
at headquarters, the collection of data and preparation of reports are usually the responsibility of
A) the home office.
B) national agencies.
C) economic consultants.
D) the international affiliate.
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27) ________ refers to the total value of all income generated by the residents of a nation,
including both the domestic production of goods and services and income from abroad.
A) Gross domestic product
B) Gross domestic income
C) Gross national income
D) Net national product
28) The World Bank categorizes countries based on GNI per capita, using the following
categories:
A) undeveloped economies, developing economies, developed economies.
B) developed economies, industrializing economies, developing economies.
C) developing economies, newly industrializing economies, developed economies.
D) high-income economies, middle-income economies, low-income economies.
29) Frank is an economist and often measures the overall economic output of a nation even
though he realizes it doesn’t account for the flows of FDI and income into and out of the nation.
What measure is Frank using?
A) gross domestic product
B) international income debt
C) gross national income
D) purchasing power parity
30) The International Monetary Fund would characterize a developing economy as one in
which
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A) technology is not as developed.
B) political activism is tempered.
C) there is a fair distribution of income.
D) the economy is more dependent on agrarian production than manufacturing.
31) Economies with per capita incomes in the low to middle range that are in a transition
toward developed status are known as
A) undeveloped economies.
B) socialist economies.
C) high-income economies.
D) emerging market economies.
32) When an international manager is considering where to do business, one of the first
considerations is
A) whether the country has a democratically elected government.
B) the dominant religion in the country.
C) the size of the economy.
D) whether the country has a manufacturing sector.
33) A measure of an economy’s size based on the market value of goods and services
produced within a nation in a year is
A) net national income.
B) gross domestic product.
C) gross national product.
D) gross national income.
34) When measuring the value produced in an economy, most international organizations
prefer to use
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A) GNI.
B) GDP.
C) GNP.
D) PPP.
35) Generally, we can assume that the higher the GNI/capita value
A) the lower the tax rate.
B) the smaller the population.
C) the larger the population.
D) the more advanced the economy.
36) The rate of growth of GNI/capita may be more important to marketers than just
GNI/capita because
A) a stable rate indicates low risk for entry.
B) a high rate indicates a fast-growing market.
C) a high rate indicates economic instability.
D) low rates indicate political stability.
37) Unrecorded transactions in an economy, such as goods and services that are bartered, are
said to be part of which economy?
A) developing
B) forward
C) informal
D) developed
38) Dissatisfaction with both the purchasing power parity (PPP) and conversions using
official exchange rates caused the World Bank to adopt what methodology to derive per capita
GNI estimates?
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A) GINI coefficients
B) Atlas conversion factors
C) inflation-growth coefficient
D) Zurich formula
39) The arithmetic average of the current exchange rate and the exchange rates in the two
preceding years, adjusted by the ratio of domestic inflation to the combined inflation rates of the
euro zone, Japan, the United Kingdom, and the United States, is known as
A) the GINI coefficient.
B) the Kolgorov coefficient.
C) the Zurich formula.
D) the Atlas conversion factor.
40) Incomes measured by the Atlas conversion factor are generally
A) more stable over time.
B) less stable over time.
C) impossible to stabilize.
D) not ready to be stabilized.
41) The part of a nation’s income that, because of unreporting or underreporting, is not
measured by official statistics is known as the
A) hidden economy.
B) gray market.
C) barter system.
D) underground economy.
42) As a general rule, the underground economy in a country will be bigger when
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A) tax rates are lower.
B) drug use is higher.
C) income levels are low.
D) government red tape is oppressive.
43) Michelle has been tasked with the job of analyzing the economy of three South American
countries to determine if they have business potential. In her final report, she makes note of
national income that may not be reported because it involves illegal activity. This indicates that
Michelle is accounting for what?
A) shadow production
B) litigation and arbitration
C) the gray market
D) the underground economy
44) Jamie lives in a country with oppressive tax rates and overwhelming government red tape
that a company must go through to export its products. How might these factors affect the
underground economy in this country?
A) The underground economy would be neutralized.
B) The underground economy would be bigger.
C) The underground economy would be smaller.
D) The underground economy would not exist.
45) GNI/capita, a crude estimate of purchasing power, must be further refined by
A) an examination of the amount of income tax paid.
B) a census to determine the total population.
C) incorporating data on how the national income is actually distributed.
D) determining the amount of discretionary income.
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46) A measure of how a nation’s income is apportioned among its people is called
A) purchasing power parity.
B) gross domestic product.
C) income distribution.
D) the Atlas conversion factor.
47) A measure of the degree to which family income within a country is distributed equally is
called
A) gross national income.
B) the GINI index.
C) gross domestic product.
D) the Atlas conversion factor.
48) A business would rely on the GINI Index to understand
A) the growth rate in production of competitor industries.
B) the degree to which family income is distributed equally within a country.
C) the relationship between income and expenses in a nation.
D) how industry is developed based on factors of endowment.
49) From comparisons of income distribution studies over time, it generally appears that
A) income is more evenly distributed in the richer nations.
B) there are few variations in income distribution among developed and developing
nations.
C) comparisons over time demonstrate that income redistribution changes relatively
quickly, so older data have limited value.
D) the middle quintiles in most nations are growing at the expense of the bottom 20
percent.
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50) Income distribution studies confirm the belief that, generally, income is more evenly
distributed in the
A) richer nations.
B) developing nations.
C) newly industrialized nations.
D) Pacific Rim nations.
51) If a nation’s GNI is small, but a small percentage of its population receives a large
percentage of that income, it may be a good market for
A) high-priced industrial products.
B) high-volume, high-priced consumer products.
C) low-volume, high-priced luxury products.
D) low-priced, high-volume discretionary goods.
52) A market analyst may determine a country is not a good market by making a simple
calculation based on
A) GNI/capita, total population, and the size of the hidden economy.
B) GNI, total population, and income distribution.
C) GNI/capita, population by state or province, and the number of pharmacies.
D) pet sales, number of CD players, and per capita lint production.
53) After the taxes are taken out of her pay, Sharon takes home $1,254 in her paycheck. This
dollar amount represents her
A) personal savings.
B) discretionary income.
C) gross income.
D) disposable income.
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54) The amount of income left after paying taxes and making essential purchases is known as
A) personal savings.
B) discretionary income.
C) gross income.
D) disposable income.
55) Because ________ consumer expenditures eliminate differences in relative prices,
marketers use these data to analyze how the composition of consumption changes with the level
of development.
A) normalized
B) inflation-free
C) PPP-based
D) historical-cost
56) The percentages of household expenditures spent on food and beverages by residents of
industrialized nations are ________ the percentages spent by residents of developing nations.
A) half
B) twice
C) equal to
D) triple
57) The percentages of household expenditures spent on consumer durables by residents of
industrialized nations are ________ the percentages spent by residents of developing nations.
A) half
B) twice
C) equal to
D) triple
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58) The percentages of household expenditures spent on transportation, communication, and
health care by residents of industrialized nations are ________ the percentages spent by residents
of developing nations.
A) half
B) two-thirds
C) equal to
D) twice
59) According to the text, commercial energy use per capita is related to the size of what set
of modern sectors?
A) commercial buildings, agriculture, transportation
B) housing, agriculture, industry
C) manufacturing, agriculture, housing
D) urban areas, industry, motorized transport
60) According to the World Bank, populations in high-income economies use how much
commercial energy per capita as do people in developing economies?
A) half as much
B) twice as much
C) five times as much
D) nearly seven times as much
61) Primary reasons for relative changes in labor costs include increases or decreases in
A) compensation.
B) total output.
C) inflation rates.
D) hours worked.
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62) The three factors that contribute to changes in labor costs include
A) compensation, productivity, exchange rates.
B) education, inflation, recession.
C) exchange rates, agriculture, political policy.
D) poverty rates, birthrates, death rates.
63) Relative changes in wage rates among nations may cause the multinational firm to
A) choose new exchange rates.
B) reduce the number of workers.
C) change its sources of supply.
D) install labor-saving machinery.
64) Unit costs of labor will decrease even though the firm is required to pay more to workers,
provided
A) management compensation decreases significantly.
B) productivity increases fast enough.
C) advertising costs are proportional.
D) interest rates rise slowly.
65) Unit labor costs will not rise in unison with wage rates if
A) the governments institute wage and price controls.
B) productivity decreases faster than wages increase.
C) the gains in productivity are greater than wage increases.
D) interest rates rise less than wage rates.
66) What typically occurs as the level of a government’s debt increases?
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A) A higher proportion of resources is invested into productive uses.
B) Government investments will increase.
C) Consumer confidence will rise.
D) More resources are redirected toward payment of interest.
67) A large international debt may result in
A) reduction in the level of component production at the local level.
B) decreased levels of foreign exchange available for importing components for local
assembly.
C) increased numbers of importers.
D) growing levels of sales by home country factories that sell to the subsidiary in the
indebted nation.
68) One response to a large international debt is for a government to
A) remove wage controls.
B) increase government spending.
C) impose price controls.
D) reduce debt payments.
69) A large international debt may cause a government to impose wage controls, which result
in
A) limiting consumer purchasing power.
B) increasing government spending.
C) eliminating price controls.
D) expanding to a larger market.
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70) Harrison Electric Corp. previously outsourced all the component parts it needed for its
lighting products but now produces those parts in-house to use in the manufacture of these items.
What concept did Harrison Electric Corp. adopt?
A) economies of scale
B) vertical integration
C) purchasing power parity
D) parallel exchange
71) Examples of socioeconomic data are
A) GNI, GNI/capita, income distribution.
B) total population, production density, and population distribution.
C) GNI/capita, total population, and population distribution.
D) total population, age distribution, and population density and distribution.
72) What benefit does population size provide when determining market potential?
A) Population size alone is an excellent indicator of economic strength.
B) Population size alone is a good predictor of demand for consumer durables.
C) Population size alone is an excellent indicator of market potential.
D) Population size alone is a poor indicator of market potential.
73) Jeremiah works for an all-natural breakfast cereal company. He has recommended that
the company market their high-cost Oats ‘n More Cereal to parts of South America because there
are millions of people there that have never heard of their products. Which socioeconomic factor
is Jeremiah basing his recommendation on?
A) population size
B) market activity
C) age distribution
D) rural-to-urban shift
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74) Generally, because of higher birthrates, developing countries often have
A) lower infant mortality rates.
B) more youthful populations than do developed nations.
C) an increasing demand in products for millennials.
D) more highly-skilled medical facilities.
75) What occurs when GNI increases faster than the population?
A) There probably is an expanding market.
B) The market is probably contracting.
C) The country where this occurs may be subject to political unrest.
D) The market is becoming less attractive for business.
76) Currently, what percentage of the world’s total population is found in developing
countries?
A) more than 75 percent
B) around 25 percent
C) close to 5 percent
D) under 50 percent
77) An examination of the world’s population and predictions for future populations suggests
the following:
A) The population of developing countries is nearly half of the world’s total population.
B) The 10 nations predicted to have the largest populations by the year 2050 are all
developing countries.
C) Developed nations will have a decreased demand for tourism and housing.
D) Developed nations will have an increased demand for financial services.
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78) Reductions in birthrates are occurring worldwide because
A) governments are scaling back family planning programs.
B) of a reduced level of urbanization.
C) women are gaining an enhanced status.
D) governments are supporting alternatives to marriage.
79) Reductions in birthrates are occurring worldwide because
A) governments are scaling back family planning programs.
B) of an increased level of urbanization.
C) women are experiencing a decline in status.
D) governments are encouraging higher levels of marriage and at earlier ages.
80) What is predicted to happen with the population of many developed countries?
A) Population levels will soar as the result of economic upturn.
B) Population levels will fall by mid-century due to low birthrates.
C) Population levels will become static as younger generations remain childless.
D) Population levels will continue to move upward and downward as a reflection of
political involvement.
81) Japan is mentioned in the age distribution discussion of the text because
A) it is the fastest-graying nation in the industrial world.
B) in the future it may have almost as many retirees as children.
C) its declining population means that the country’s wealth will be spread among a
smaller number of people, increasing its overall prosperity.
D) its declining population means that the country’s social security funds will last
longer.
82) The ratio between the number of older people and younger people, on whom elders are
dependent to supply the funds to provide social security benefits, is called the
A) dependency ratio.
B) population distribution.
C) population density.
D) graying challenge.
83) Kellen has been asked to determine how many people live in the 50 square miles
surrounding the location of the proposed building project. What does Kellen need to find?
A) population density
B) birthrate
C) population distribution
D) age distribution
84) ________ is a measure of the number of inhabitants per area unit.
A) Market size
B) Birthrate
C) Population distribution
D) Population density
85) ________ is a measure of how the inhabitants are distributed over a nation’s area.
A) Urbanization
B) Population size
C) Population distribution
D) Population density
86) The rural-to-urban shift is a reflection of