Deck 8: The Economic Dimension

Question 1

Economic conditions of countries are indicators of whether future investment or disinvestment by a firm will be appropriate.

Answer 1

True
Explanation: Factors such as economic growth rates, market trends, and the economic policy of governments are likely to affect the profitability and performance of existing operations and whether or not future investment or divestment is required

Question 2

The ability to fine-slice elements of the value chain and relocate them across national borders to where they can be performed the best will generate greatest value to the host country firm

Answer 2

False
Explanation: Fine-slice elements of the value chain will generate the greatest value to the lead firm

Question 3

Risk from an economic perspective, is the potential that the return achieved from a business endeavour is not that which was expected

Answer 3

True
Explanation: Includes financial risk, operational risk, and certain aspects of political risk

Question 4

All country-level macroeconomic statistics and indicators are to be taken at face value as the basis for taking commercial decisions because national economic data is reliable

Question 5

Business conditions of a country are shaped, to a great extent, by the nature of its prevailing economic system

Question 6

A command economy is an economic system in which the production and investment decisions in a country are set by the interplay of demand and supply in a way that signals to producers what to produce and to consumers what to purchase

Question 7

Members of the European Union reflect examples of free market economies.

Question 8

Command economies are regarded as stimulating innovation and entrepreneurship

Question 9

Economic freedom generally has the effect of reducing transaction costs and ameliorating some of the liability of foreignness

Question 10

A country's economic size provides a strong indication as to the scale of business opportunities offered by a country

Question 11

Economic factors when used as the basis for taking commercial decisions in combination determine Please select all that apply.

A) Uncertainty
B) Opportunities
C) Costs
D) Risks

Question 12

The main features of a planned economy are: Please select all that apply.

A) Majority of resources are owned by the state
B) Production and distribution of goods and services determined by the state
C) Limited legal restrictions on market forces
D) Strong rule of law

Question 13

Inflationary pressures in general have an adverse effect on: Please select all that apply.

A) National economic performance
B) Political stability
C) Exchange rates
D) Social cohesion

Question 14

Various types of labour-related cost that exert a strong effect on the location decisions of global factories are: Please select all that apply.

A) Wage rates
B) Earnings
C) Take-home pay
D) Pension and social security contributions

Question 15

The balance of payments is _______ (select all that applies)

A) … a statement of a country's trade and financial transactions with the rest of the world in a given period-usually, a year.
B) … a key economic indicator
C) … a measure of economic exposure
D) … made of two components: the current account and the capital account.

Question 16

Potential impact of inflation on global factory firms is:

A) Signals low economic growth
B) Signals reduced government spending
C) Signal a lack of market economic systems
D) Reduces consumer spending

Question 17

Gross national income (GNI) is…

A) The value of all domestic production, plus income from the international production activities of national companies abroad (in a given year);
B) The least preferred measure of the World Bank.
C) The value of all final goods and services produced within a nation, plus the income earned by its citizens abroad, minus the income earned by foreigners from domestic production
D) The total market value of all final goods and services produced and sold within a country; equal to total private consumption, investment, and government spending, plus net exports (the value of exports minus the value of imports) in a given year.

Question 18

Changes in the value of a currency when normalising for changes in the domestic price level is referred to as the:

A) Real exchange rate
B) Spot exchange rate
C) Forward exchange rate
D) Hedge

Question 19

When a government or central bank determines the value at which a national currency is linked to one or more reference currencies for an extended period of time, is know as:

A) Fixed exchange rate
B) Floating exchange rate
C) Crawling exchange rate peg
D) Managed float

Question 20

Where a group of countries share a common but distinct currency is know as:

A) Monetary union
B) Third-country currency
C) Currency substitution
D) Currency board