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Chapter 04

chapter 04.doc

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Department
Administrative Studies
Course Code
ADMS 3960
Professor
Brian Zeiler- Kligman

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International Business: Environments and Operations, 14e (Daniels et al.) Chapter 4 The Economic Environments Facing Businesses 1) The recent global economic crisis has led to which of the following? A) governments seeking to impose more constraints on capitalism B) governments seeking to eliminate constraints on capitalism C) governments seeking to increase the interdependence of developing economies D) governments seeking to eliminate the interdependence of developing economies Answer: A Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 1 AACSB: Dynamics of the global economy 2) Which of the following is most likely a true statement about the global economy since the 1980s? A) Socialist governments are intervening more in global exchanges. B) Wealthy countries are maintaining total control of expanding markets. C) Developing countries are losing their share of foreign-exchange reserves. D) Emerging economies are adopting the principles and practices of free markets. Answer: D Diff: 3 Learning Outcome: Discuss trends in and the debate over globalization Skill: Concept Objective: 3 AACSB: Dynamics of the global economy 3) Kyle, an international manager for Apex Industries, has been given the task of analyzing the economies of three different emerging countries for the firm's potential expansion. Which of the following questions is LEAST relevant to Kyle's assignment? A) How much freedom will Apex have to run its foreign operations? B) What are the current economic policies related to development? C) What is the likelihood that Apex can fill positions with locals? D) What factors in the country drive or hinder economic change? Answer: C Diff: 3 Learning Outcome: Describe how differences in political economy influence economic development Skill: Application Objective: 1 AACSB: Dynamics of the global economy 1 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 4) Managers at Morrison Manufacturing are considering expanding the firm's production overseas and want to ensure that the firm is located in a country with a high degree of economic freedom. Which of the following locations would most likely offer Morrison the highest economic freedom? A) Mexico B) Hong Kong C) Venezuela D) North Korea Answer: B Diff: 2 Skill: Application Objective: 2 AACSB: Dynamics of the global economy 5) Since the late 1980s, the growing emergence of freer markets has been powered by the realization that ________. A) economic growth is directly related to economic freedom B) economic growth has a limited effect on the standard of living C) adoption of free market principles contributes to social injustices D) centrally planned economies are best designed to deliver progress Answer: A Diff: 2 Learning Outcome: Describe how differences in political economy influence economic development Skill: Application Objective: 2 AACSB: Dynamics of the global economy 6) The Economic Freedom Index indicates that economic freedom is positively correlated with all of the following EXCEPT ________. A) life expectancy B) literacy C) environmental sustainability D) diversity Answer: D Diff: 2 Skill: Concept Objective: 2 2 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 7) The recent global credit crisis has interrupted the trend of economies ________. A) rapidly adopting the command market model B) steadily adopting the free market model C) moving from the mixed to the command model D) turning away from the mixed model Answer: B Diff: 2 Learning Outcome: Discuss trends in and the debate over globalization Skill: Concept Objective: 2 AACSB: Dynamics of the global economy 8) History suggests that if the economic crisis worsens, we are likely to see more people question the ________. A) fall of communism B) legitimacy of capitalism C) practicality of mixed market economies D) correlation between economic freedom and prosperity Answer: B Diff: 2 Learning Outcome: Describe how differences in political economy influence economic development Skill: Concept Objective: 2 AACSB: Dynamics of the global economy 9) According to research, which of the following countries is the strongest supporter of free markets? A) China B) India C) France D) Ukraine Answer: A Diff: 2 Learning Outcome: Describe how differences in political economy influence economic development Skill: Concept Objective: 2 AACSB: Dynamics of the global economy 3 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 10) Which of the following is NOT a characteristic of capitalism? A) private ownership of assets B) right to profit from individual effort C) state controlled resources D) private control of investment Answer: C Diff: 2 Learning Outcome: Describe how differences in political economy influence economic development Skill: Concept Objective: 3 11) Communism primarily relies on a system of ________. A) private business ownership B) competitive pricing and marketing C) market-generated supply and demand D) government controlled economic activity Answer: D Diff: 2 Learning Outcome: Describe how differences in political economy influence economic development Skill: Concept Objective: 3 12) In a market economy, the patterns of resource allocation are most directly influenced by ________. A) government administrators who monitor the equilibrium of supply and demand B) industry coalitions that strive to improve the efficiency of production and service C) consumer group alliances that negotiate with firms to improve product quality D) consumers who "vote" by their personal decision to buy or not buy products Answer: D Diff: 2 Learning Outcome: Describe how differences in political economy influence economic development Skill: Concept Objective: 3 13) A system in which individuals, rather than the government, make the majority of economic decisions is commonly referred to as a ________. A) command economy B) market economy C) private economy D) mixed economy Answer: B Diff: 1 Skill: Concept Objective: 3 4 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 14) Market economies are primarily characterized by ________. A) formal cooperation among government, companies, and workers to achieve stable growth B) heavy government spending and high taxation to pay for a range of social services C) minimal governmental participation D) restricted consumer powers Answer: C Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 3 15) In a command economy, the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold are planned by ________. A) government officials B) private industries C) individual entrepreneurs D) local trade associations Answer: A Diff: 1 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 3 16) In a command economy, ________. A) businesses and consumers are assumed to be the best judges of how resources should be allocated B) the government sets goals and determines the price and quantity of what is produced C) different economic sectors coordinate the activities of the federal government D) each enterprise sets its goals before making reports to the central government Answer: B Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 3 5 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 17) In Country X, all dimensions of economic activity, including pricing and production decisions, are determined by the central government. Which term best describes Country X? A) market economy B) mixed economy C) command economy D) democratic economy Answer: C Diff: 2 Learning Outcome: Describe how differences in political economy influence economic development Skill: Application Objective: 3 18) Which of the following is most typical of a command economy? A) Consumers have choices of many substitutes for any given product. B) Quality of products and services tends to be consistent. C) The prices of goods and services frequently change. D) Most products are usually in short supply. Answer: D Diff: 2 Learning Outcome: Describe how differences in political economy influence economic development Skill: Application Objective: 3 19) In a ________ economy, certain sectors of the economy are left to private ownership and free market mechanisms, while other sectors have significant state ownership and government planning. A) state-directed B) market C) command D) mixed Answer: D Diff: 1 Skill: Concept Objective: 3 6 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 20) Some countries opt for a mixed economic system in the belief that although an economic system should aspire to achieve the efficiencies created by free markets, it must also support policies needed to ________. A) destabilize poverty rates B) achieve low unemployment C) harness economic growth D) inequitably distribute wealth Answer: B Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 3 AACSB: Dynamics of the global economy 21) In the Economic Freedom Index, ________ exhibit high economic freedom whereas ________ exhibit little to no economic freedom. A) mixed economies; market economies B) command economies; market economies C) market economies; command economies D) centrally planned economies; command economies Answer: C Diff: 2 Skill: Concept Objective: 3 22) Which of the following countries is the best example of a mixed economic model? A) the United States B) France C) the United Kingdom D) Australia Answer: B Diff: 2 Skill: Concept Objective: 3 7 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 23) Country X is in the process of transforming from a command economy to a market economy. This process most likely involves ________. A) standardized procedures implemented by the state B) high economic growth rates for the long-term C) privatization of many factors of production D) violent political and legal upheaval Answer: C Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Application Objective: 3 AACSB: Dynamics of the global economy 24) In a country that practices state capitalism, all of the following are most likely to be handled by the state EXCEPT ________. A) leveraging control of the financial system B) developing national corporations C) encouraging foreign competition D) managing trade relations Answer: C Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 4 AACSB: Dynamics of the global economy 25) 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 Answer: D Diff: 2 Skill: Concept Objective: 5 8 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 26) In computing GNI, the value of a Ford car that is manufactured in Mexico using capital from the United States would ________. A) be added to the GNI of the United States as well as to the GNI and GDP of Mexico B) not be added to the GNI of the United States but would be added to the GNI of Mexico C) only affect the computation of GDP and have no bearing on GNI D) be added to the GNI of the United States but not the GNI of Mexico Answer: D Diff: 3 Skill: Application Objective: 5 AACSB: Analytic Skills 27) 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 commonly referred to as the ________. A) net national product (NNP) B) gross national product (GNP) C) gross domestic product (GDP) D) gross national income (GNI) Answer: C Diff: 1 Skill: Concept Objective: 5 28) To determine whether the standard of living within a country is rising or falling, economists would most likely use which of the following measures? A) per capita GNI B) GNI growth rate C) purchasing power parity D) degree of human development Answer: B Diff: 2 Skill: Concept Objective: 5 29) Eileen, a manager at an international restaurant chain, wants to know if it will be most cost effective to buy 1,000 pounds of sugar in Country X or in Country Y using U.S. dollars. Which of the following is Eileen most likely trying to determine? A) purchasing power parity B) economic growth rate C) gross domestic income D) gross national product Answer: A Diff: 2 Skill: Application Objective: 5 9 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 30) The United Nations' ________ measures life expectancy, educational attainment, and the standard of living in a given country. A) Human Development Index B) Emerging Economic Stability C) Genuine Progress Indicator D) Net National Product Answer: A Diff: 1 Skill: Concept Objective: 5 31) The Human Development Index measures the average achievements in a country on three basic dimensions of human development, including ________. A) promotion of cultural values B) quantity of free time C) extent of knowledge D) sustainability Answer: C Diff: 2 Skill: Concept Objective: 5 32) The ________ starts with the same accounting framework used to calculate GDP but then adjusts for values assigned to environmental quality, population health, livelihood security, equity, free time, and educational attainment. A) Gross National Index B) Net National Product C) Genuine Progress Indicator D) Human Development Index Answer: C Diff: 2 Skill: Concept Objective: 5 33) ________ is a general, sustained rise in prices measured against a standard level of purchasing power. A) Deflation B) Inflation C) Expansion D) Reflation Answer: B Diff: 1 Skill: Concept Objective: 5 10 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 34) What is the most likely reason that a universal scheme for assessing the performance and potential of a country's economic environment does NOT exist? A) difficulties of identifying a definitive set of predictive economic indicators B) a lack of reliable economic data from most developed economies C) the isolation of most markets from each other D) static nature of the marketplace Answer: A Diff: 2 Skill: Concept Objective: 5 35) A worrisome outcome of chronic inflation is that it tends to ________. A) erode confidence in a country's currency B) give central banking officials excessive flexibility to manage monetary policy C) increase the real income of people, thereby inflating their spending and borrowing levels D) lower consumer demand for foreign goods, which triggers lower prices and eventually lower employment Answer: A Diff: 2 Skill: Concept Objective: 5 36) In most cases, governments ________ in order to reduce or control inflation. A) lower interest rates B) increase taxes C) raise interest rates D) decrease taxes Answer: C Diff: 2 Skill: Concept Objective: 5 37) ________ can occur when demand declines and supply grows. A) Inflation B) Chronic inflation C) Reflation D) Deflation Answer: D Diff: 1 Skill: Concept Objective: 5 11 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 38) In the U.S., the unemployment rate indicates the ________. A) percentage of the labor force that wants to work full-time but can only find part-time employment B) number of people who have stopped looking for work because full-time jobs are unavailable C) percentage of unemployed workers seeking paid work relative to the total labor force D) number of workers eligible for government services and unemployment benefits Answer: C Diff: 2 Skill: Concept Objective: 5 39) The so-called "misery index" is the sum of a country's ________. A) foreign and national debt B) inflation and unemployment rates C) unemployment level and total debt D) trade deficit and long-term inflation rate Answer: B Diff: 2 Skill: Concept Objective: 5 40) A government's internal debt can be incurred for any EXCEPT which of the following reasons? A) The tax system is so poorly run that the government cannot collect all the revenues it expects. B) Government costs such as security and social programs exceed total tax revenues. C) The government borrows money from international financial institutions. D) State-owned enterprises run large deficits. Answer: C Diff: 3 Skill: Concept Objective: 5 41) Country X has a significant amount of external debt. Which of the following is the most likely cause? A) The government of Country X borrowed money from local banks. B) The government of Country X borrowed money from other governments. C) The government of Country X spent more than it collected in revenues. D) The government of Country X received short-term credits from selling bonds. Answer: B Diff: 2 Skill: Application Objective: 5 12 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 42) Uneven income distribution ________. A) exists in almost every country B) is largely a problem for poorer nations C) primarily affects people in urban settings D) is limited to a small share of the world population Answer: A Diff: 2 Skill: Concept Objective: 5 AACSB: Dynamics of the global economy 43) Which of the following is most likely a FALSE statement about income inequality? A) The richest 1% of the world's population claims as much income as the bottom 57%. B) GNI is the most effective tool for estimating the relative wealth of a nation's citizens. C) Among industrialized nations, the U.S. has the largest inequality gap between rich and poor. D) Income inequality between metropolitan and rural areas threatens a country's social stability. Answer: B Diff: 3 Skill: Concept Objective: 5 AACSB: Dynamics of the global economy 44) The World Bank reports that roughly ________ percent of the world's population is poor. A) 50 B) 75 C) 80 D) 95 Answer: C Diff: 2 Skill: Concept Objective: 5 AACSB: Dynamics of the global economy 45) The Gini coefficient is primarily used to estimate a country's ________. A) gross national product B) economic development C) political and legal risk D) income inequality Answer: D Diff: 1 Skill: Concept Objective: 5 13 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 46) The ________ view calls for companies to develop low-cost, high-powered, resource- minimizing innovations that can be marketed to the billions of people living on less than a few dollars a day. A) Base of the Pyramid B) Hierarchy of Needs C) Happy Planet Index D) Gini coefficient Answer: A Diff: 1 Skill: Concept Objective: 5 47) Which of the following is a statement that summarizes all economic transactions between a country and the rest of the world during a given period of time? A) trade deficit B) Gini coefficient C) balance of payments D) purchasing power parity Answer: C Diff: 1 Skill: Concept Objective: 5 48) The two main categories in the balance of payments are the ________. A) merchandise exchange account and the services account B) external debt and the unilateral transfers account C) merchandise trade account and the capital account D) current account and the capital account Answer: D Diff: 2 Skill: Concept Objective: 5 49) In a country's balance of payments, the ________ tracks all trade activity in merchandise. A) capital account B) current account C) payment account D) deficit account Answer: B Diff: 2 Skill: Concept Objective: 5 14 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 50) An economic system is the set of structures and processes that ________ in a country. A) guides the allocation of resources and shapes the conduct of business activities B) directs the movement of specific products to specific consumers C) sets the standards of competitive success for companies in the economy D) stipulates the roles and responsibilities of consumers Answer: A Diff: 1 Skill: Concept Objective: 3 51) Pender Pharmaceuticals is considering expanding overseas and is focusing primarily on the BRICs. Which of the following countries is one that Pender is considering? A) Indonesia B) Chile C) Russia D) Burma Answer: C Diff: 2 Skill: Application Objective: 5 52) Taylor Enterprises wants to expand its operations into Asia. Managers are focusing on countries with high degrees of economic freedom most likely because the firm is interested in a country with ________. A) minimal government intervention B) standardized minimum wages C) laws favoring sustainability D) state-run corporations Answer: A Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Application Objective: 2 15 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 53) Tatum Manufacturing recently opened a new facility in Hong Kong. The firm can most likely expect the Hong Kong government to ________. A) monitor market prices B) control natural resources C) ensure fair competition D) provide innovation incentives Answer: C Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Application Objective: 3 AACSB: Dynamics of the global economy 54) According to the text, which of the following countries is best characterized as a pure example of a command economy? A) Russia B) Libya C) China D) Vietnam Answer: B Diff: 2 Skill: Concept Objective: 3 55) A firm with o
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