ECON 1BB3 Study Guide - Midterm Guide: Foreign Portfolio Investment, Bond Market, Financial System
ECON 1BB3 Full Course Notes
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Question 3
According to Joseph Schumpeter, the theory of creative destruction describes a process by which
A | some new products unleash a gale of destruction that drive other new products out of the market. | |
B | new products unleash a gale of destruction that drives old products out of the market. | |
C | new products are created by the destruction of capital. | |
D | the creation of new products never involves the destruction of old products. |
Question 4
Which of the following countries had the highest GDP per capita in 2012?
A Qatar | ||
B | United States | |
C | Japan | |
D | Norway |
Question 5
________ save a ________ of their income. This ________ capital in their economy and raises economic growth.
A | Developing countries; large proportion; decreases | |
B | Developing countries; small proportion; increases | |
C | High-income countries; large proportion; increases | |
D | High-income countries; small proportion; increases |
Question 6
The demand for loanable funds is determined by the willingness of ________ to borrow money to engage in new investment projects.
A
A | government | |
B | households | |
C | banks | |
D | firms |
Question 7
The U.S. economy has been more stable since 1950.
True
False
Question 8
When the economy reaches a trough in a business cycle, which of the following will occur?
A | Income, production, and employment will continue to fall. | |
B | Income, production, and employment will begin to rise. | |
C | Income and production will rise, but employment will continue to fall. | |
D | Employment rises, but income and production will continue to fall. |
Question 9
In a closed economy, what is the relationship between saving and investment?
A | Saving is greater than investment. | |
B | Investment is greater than saving. | |
C | Investment is equal to saving. | |
D | Investment may be greater or smaller than saving. |
Question 10
The per-worker production function shows the relationship between ________ per hour worked and ________ per hour worked, holding ________ constant.
A | labor; real GDP; technology | |
B | capital; real GDP; technology | |
C | labor; capital; real GDP | |
D | capital; labor; real GDP |
Question 11
New growth theory states that increases in ________ capital will result in ________ at the ________ level.
A | knowledge; increasing returns to scale; firm | |
B | physical; decreasing returns to scale; firm | |
C | knowledge; decreasing returns to scale; economy | |
D | knowledge; increasing returns to scale; economy |
Question 12
Which of the following is not a reason why the Industrial Revolution occurred when and where it did?
A | The British government was committed to upholding private property rights. | |
B | The British government was able to eliminate arbitrary increases in taxes. | |
C | The British government was able to more easily seize wealth. | |
D | Institutional changes by the British government helped protect wealth. |
Question 13
Growth in real GDP per capita for the world economy was greatest during
A | the seventeenth century. | |
B | the eighteenth century. | |
C | the nineteenth century. | |
D | the twentieth century. |
Question 14
Which of the following is a normative statement about economic growth?
A | Economic growth is associated with higher labor productivity growth. | |
B | Economic growth increases GDP per capita. | |
C | Economic growth hurts developing countries. | |
D | Foreign direct investment stimulates economic growth. |
Question 15
The effect of a recession on a company like Whirlpool Corporation is such that
A | sales decline more sharply for Whirlpool as compared to firms that do not produce durable goods. | |
B | profits fall less sharply as compared to firms that do not produce durable goods. | |
C | the decline in sales is more short-lived as compared to firms that do not produce durable goods. | |
D | there is no difference in the impact of the recession on its profits as compared to firms that do not produce durable goods. |
Question 16
For the recessions in the United States since the 1950s,
A | cyclical unemployment has been non-existent. | |
B | unemployment rises on average by about 1.2 percentage points 12 months after a recession begins. | |
C | unemployment falls on average by 2 percentage points 12 months after a recession begins. | |
D | unemployment rises on average about 5 percentage points 12 months after a recession begins. |
Question 17
You are an economic advisor to the president. You are asked to recommend a policy to promote long-term economic growth in the economy. Which of the following policies would you choose?
A | a reduction in sales taxes | |
B | an investment tax credit | |
C | a reduction in taxes on luxury yachts | |
D | All of these |
Question 18
In comparison to a government that runs a balanced budget, when the government runs a budget deficit,
A | the equilibrium interest rate will fall. | |
B | business investment will fall. | |
C | household savings will fall. | |
D | None of these |
Question 19
If labor productivity growth slows down in a country, this means that the growth rate in ________ has declined.
A | labor force participation | |
B | the quantity of goods or services that can be produced by one hour of work | |
C | the working-age population | |
D | nominal GDP |
Question 20
Policies to promote growth by increasing saving and investment work through
A | decreasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital. | |
B | increasing the supply of loanable funds, increasing the interest rate, raising the level of investment in physical capital. | |
C | increasing the supply of loanable funds, lowering the interest rate, lowering the level of investment in physical capital. | |
D | increasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital. |
The primary costs of FDI to host countries are:
Loss of sovereignty and patriotism | ||
Adverse effects on competition and exports | ||
Capital outflow | ||
Loss of sovereignty, adverse effects on competition, and capital outflow |
____ suggests that FDI, unrestricted by government intervention, will enable countries to tap into their absolute or comparative advantage by specializing in the production of certain goods or services.
The radical view | ||
The free market view | ||
Pragmatic nationalism | ||
Expropriation |
What are the benefits of FDI to home countries?
Repatriated earnings from profits from FDI. | ||
Increased exports of components and services to host countries. | ||
Learning via FDI from operations abroad. | ||
All of these answers |
When one firm enters a foreign country through FDI, its rivals are likely to follow by undertaking additional FDI in a host country to:
Create knowledge spillover | ||
Discover a new market for its goods | ||
Overcome and combat market failure through FDI | ||
Acquire location advantages or neutralize the first mover’s location advantages |
Most countries practice:
Pragmatic nationalism | ||
Free market based FDI | ||
Government embracing radical view | ||
French patriotism |
FDI may be viewed as a reflection of firm motivation to extend firm-specific capabilities abroad and their responses to overcome imperfections and failures.
True | ||
False |
Most countries practice a totally "free market" view.
True | ||
False |
8. Outsourcing is the process of turning over an organizational activity to an outside supplier, located in a foreign country, which will perform it on behalf of the local firm.
True | ||
False |
Financial, physical, and technological resources and capabilities are all tangible assets.
True | ||
False |
A firm's resources and capabilities are tangible assets a firm uses to choose and implement its strategies.
True | ||
False |
An example of low power distance would be when subordinates address their bosses on a first-name basis.
True | ||
False |
Benchmarking is an assessment as to whether a firm has resources and capabilities to perform a particular activity in a manner superior to competitors.
True | ||
False |
A country with low-masculinity has a more subtle differentiation between the gender roles.
True | ||
False |
Setting up subsidiaries abroad so the work can be performed in-house but in the foreign location is also called captive sourcing.
True | ||
False |
Managers in low uncertainty avoidance countries rely more on experience and training than managers in high uncertainty avoidance countries who rely more on rules.
True | ||
False |
Informal institutions include laws, regulations, and rules.
True | ||
False |
The United States is often classified as a collective society.
True | ||
False |
A pure market economy characterized by the "invisible hand" of market forces is noted by
John Stuart Mill | ||
Adam Smith | ||
Aristotle | ||
Amatya Zen |
Culture is defined in the text as:
The communication between members of similar location. | ||
The collective programming of the mind, which distinguishes the members of one group or category of people from another. | ||
The main component of formal institutions. | ||
The attitudes and behaviors characteristic of a particular social group or organization. |
When an expat employee returns to her or his current employer but the employer does not provide attractive opportunities, she/he often may be hired by a competitor firm. Why?
Competitor firms are also interested in globalizing their business. | ||
Former expats bring instant expertise and experience. | ||
Competing firms will pay a higher premium for expertise. | ||
All of these answers |
The government taking a "hands-off approach" is known as:
Laissez faire | ||
Command economy | ||
Mixed economy | ||
Liberal approach |
Expatriate managers make ideal candidates for top management positions.
True | ||
False |
____ are defined as rights associated with the ownership of intellectual property.
Patents | ||
Copyrights | ||
Trademarks | ||
Intellectual property rights |
In a collective society:
Family units are highly valued. | ||
Being an entrepreneur is a popular mindset | ||
Being different than your neighbor is important. | ||
Outsiders are easily trusted. |
Which of the following definitions best defines an expatriate manager?
A manager who works outside his or her native country | ||
A manager of great expertise | ||
An ex-manager rehired for advisory purposes | ||
None of these answers |