Under a pegged exchange rate regime, a country:
A. commits itself to converting its domestic currency on demand into another currency
at a fixed exchange rate.
B. will peg the value of its currency to that of a major currency.
C. valuates its currency without attaching it to a reference currency.
D. follows the foreign exchange market to determine the relative value of a currency.
_____ refers to a range of barter-like agreements by which goods and services can be
traded for other goods and services.
A. Countertrade
B. Carry trade
C. Dumping
D. Capital flight
A(n) _____ is quoted for 30 days, 90 days, and 180 days into the future.
A. forward exchange rate
B. currency swap
C. spot exchange rate
D. arbitrage
What is double taxation in the context of FDI?
A. Taxation at twice the normal rate for foreign companies
B. Taxing the producers as well as suppliers
C. Taxation of income in both home and host country
D. Taxation of both income as well as dividends paid As an incentive to encourage
domestic firms to undertake FDI, many countries have eliminated double taxation of
foreign income (i.e., taxation of income in both the host country and the home country).
When a firm emphasizes personal selling rather than mass media advertising in the
promotional mix, the firm is using a _____.
A. standardized strategy
B. pull strategy
C. push strategy
D. localized strategy
Pressures for cost reduction are intense in industries where:
A. major competitors are based in high-cost locations.
B. consumers are weak and face high switching costs.
C. there is persistent excess capacity.
D. the company is located in a low-cost location.
_____ arises when two or more enterprises encounter each other in different regional
markets, national markets, or industries.
A. Comparative advantage
B. Multipoint competition
C. Competitive advantage
D. Economic advantage Multipoint competition arises when two or more enterprises
encounter each other in different regional markets, national markets, or industries.
Economic theory suggests that firms will try to match each other’s moves in different
markets to try to hold each other in check. If a firm is successful with this strategy, the
firm will ensure that a rival does not take a commanding position in one market and
then use the profits generated in that market to underwrite competitive attacks in other
markets.
_____ refers to a situation where a government does not attempt to influence through
quotas or duties what its citizens can buy from another country.
A. Fair trade
B. Trade theory
C. Free trade
D. Mercantilism
The liquidity of the market is _____ in a purely domestic capital market.
A. held in reserves
B. unlimited
C. based upon the stock market
D. limited
Market makers are the financial service companies that connect investors and
borrowers. Those who want to borrow money typically include:
A. governments
B. corporations with surplus cash
C. pension funds
D. insurance companies
According to the 1986 Uruguay Round, the _____ was to be created to implement the
GATT agreement.
A. World Trade Organization
B. International Monetary Fund
C. United Nations
D. World Bank
The political economy of many of the world’s nation-states has changed radically since
the late 1980s. Which of the following is a trend that has been evident?
A. a wave of democratic revolutions has swept the world.
B. totalitarian governments have arisen, replacing democratically elected governments.
C. there has been a strong move toward centrally planned economies and away from
free market economic models.
D. mixed economies are fast replacing market economies.
Guanxi is an important mechanism for building long-term business relationships and
getting business done in China.
When using the projected spot exchange rate to translate both the budget and
performance figures into the corporate currency, the projected rate in such cases will
typically be the:
A. forward exchange rate as determined by the foreign exchange market.
B. exchange rate that exists at the start of a project.
C. exchange rate when the budget was prepared.
D. transfer price that a firm will offer to one or more of its subsidiaries.
_____ is measured by the percentage increase in net profits over time.
A. Profit growth
B. Value
C. Profitability
D. Operational economy
Currencies of countries with currency boards will become uncompetitive and
overvalued if:
A. local inflation rates remain higher than the inflation rate in the country to which the
currency is pegged.
B. the country to which the currency is pegged experiences a trade deficit.
C. local inflation rates are lower than the inflation rate in the country to which the
currency is pegged.
D. the country to which the currency is pegged experiences a trade surplus.
Which of the following is the prime reason why Africa has attracted FDI in recent
years?
A. Growth of the services sector
B. Complete deregulation of markets
C. Wave of privatization
D. Raw material availability In recent years, Chinese enterprises have emerged as major
investors in Africa, particularly in extraction industries where they seem to be trying to
assure future supplies of valuable raw materials.
The most widely practiced theocratic legal system in the world today.
A. Christian
B. Hindu
C. Jewish
D. Islamic
Designing for manufacturing:
A. decreases product quality.
B. increases costs.
C. can increase product quality.
D. not only increases costs, but also lowers product quality.
_____ is an international market research company based in London that works with
more than half of the Fortune 500 companies.
A. Ipsos
B. Nielsen
C. NPD Group
D. Kantar
The “Swiss Made” label has leveraged several watch-making companies (for example,
TAG Heuer) for decades now. This is an example of a ____ effect.
A. linguistic
B. country of origin
C. noise
D. cultural
A(n) _____ asserts that if a manager of a multinational sees that firms from other
nations are not following ethical norms in a host nation, that manager should not either.
A. Kantian ethicist
B. righteous moralist
C. naive immoralist
D. utilitarian ethicist
In a letter of credit transaction, the importer secures the letter of credit:
A. before product shipment.
B. after product shipment.
C. from the exporter’s bank.
D. after receiving the product.
Turnkey projects are most common in which of the following industries?
A. Fresh fruit, grain, and meat products
B. Chemical, pharmaceutical, and metal refining
C. Consumer durables, computer peripherals, and automotive parts
D. Apparel, shoes, and leather products
The way a product is delivered is determined by the _____.
A. firm’s entry strategy
B. firm’s product positioning
C. target market
D. market segments
Firms entering a market via a _____ must bear all the costs and risks associated with
the venture.
A. licensing contract
B. joint venture
C. turnkey contract
D. wholly owned subsidiary
A(n) _____ occurs when 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.
A. buyback
B. barter
C. offset
D. switch trade
Which of the following statements is true of tax havens?
A. Firms that export to tax havens get special tax concessions from home governments.
B. Firms would require huge capital investments to start business in tax havens.
C. Nations such as United States are widely regarded as tax havens.
D. Firms can save tax by establishing a non-operating subsidiary in the tax haven.
_____ is a term used to describe the practice of transferring liquid funds from a foreign
subsidiary to the parent company.
A. Deferral principle
B. Bilateral netting
C. Unbundling
D. Multilateral netting
Under the _____, cases are judged with reference to three characteristics: tradition,
precedent, and custom.
A. theocratic law system
B. civil law system
C. contract law system
D. common law system
The age of a foreign subsidiary:
A. has no influence on payment of dividends.
B. indicates the number of capital investment needs; older subsidiaries have higher
needs.
C. influences dividend policy in that younger subsidiaries tend to remit a higher
proportion of their earnings in dividends to the parent company.
D. influences dividend policy in that older subsidiaries tend to remit a higher proportion
of their earnings in dividends to the parent company.
An advantage of _____ with a local partner is the knowledge of the local environment
that the local partner contributes to the venture.
A. turnkey contracts
B. licensing contracts
C. joint ventures
D. wholly owned subsidiary contracts
Which of the following would lead a firm to choose a concentration of production?
A. Trade barriers are high.
B. Location externalities are not important.
C. Important exchange rates are expected to remain relatively stable.
D. The product’s value-to-weight ratio is low.