Deck 1: Globalization

Question 1

The United States accounted for a significantly larger share of the world economy in 2012 than it did in the 1960s.

Answer 1

False
Explanation: During the 1960s, the United States routinely accounted for 20 percent of world exports of manufactured goods, but the U.S. share of world exports of goods and services had slipped to 8.7 percent by 2012, behind that of China.

Question 2

The World Trade Organization, the International Monetary Fund and its sister institution the World Bank, and the United Nations were all created by voluntary agreement between individual nation-states.

Answer 2

True
Explanation: Over the past half century, a number of important global institutions have been created to help manage, regulate, and police the global marketplace and to promote the establishment of multinational treaties to govern the global business system. These include the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO); the International Monetary Fund (IMF) and its sister institution, the World Bank; and the United Nations (UN). All these institutions were created by voluntary agreement between individual nation-states, and their functions are enshrined in international treaties.

Question 3

By offering the same basic product worldwide, firms help to create a global market.

Answer 3

True
Explanation: It has been argued for some time that the tastes and preferences of consumers in different nations are beginning to converge on some global norm, thereby helping to create a global market. By offering the same basic product worldwide, firms help to create a global market.

Question 4

The Uruguay Round extended GATT to cover services as well as manufactured goods.

Question 5

The real costs of information processing and communication have fallen dramatically in the past two decades.

Question 6

Although most international trade and investment are still conducted by large firms, many medium-size and small businesses are becoming increasingly involved in international trade and investment.

Question 7

As a result of globalization, we have been moving toward a world in which national economies are relatively self-contained entities.

Question 8

Substantial impediments, such as barriers to foreign direct investment, make it difficult for firms to achieve the optimal dispersion of their productive activities to locations around the globe.

Question 9

The globalization of markets and production and the resulting growth of world trade, foreign direct investment, and imports all imply that firms are finding it easier to protect themselves from attack by foreign competitors.

Question 10

The WTO is seen as the lender of last resort to nation-states whose economies are in turmoil and whose currencies are losing value against those of other nations.

Question 11

As a result of globalization, companies rarely need to customize marketing strategies, product features, and operating practices in different countries.

Question 12

Containerization has revolutionized the transportation business, significantly lowering the costs of shipping goods over long distances.

Question 13

Beginning in the 1970s, European and Japanese firms began to shift labor-intensive manufacturing operations from developing nations to their home countries where labor costs were lower.

Question 14

The lowering of trade and investment barriers allows firms to base production at the optimal location for that activity.

Question 15

Throughout the 1990s, the amount of investment directed at both developed and developing nations increased dramatically.

Question 16

Foreign direct investment (FDI) occurs when a firm invests resources in business activities outside its home country.

Question 17

The stock of foreign direct investment refers to the total cumulative value of foreign investments in a country.

Question 18

The IMF is less controversial than its sister institution, the World Bank.

Question 19

As a result of international trade, the economies of the world's nation-states are becoming less intertwined.

Question 20

After World War II, the advanced nations of the West committed themselves to increasing barriers to the free flow of goods, services, and capital between nations.

Question 21

As a result of globalization, international businesses can avoid the haggle of currency exchanges during cross-border transactions.

Question 22

In general, as countries get richer, they enact tougher environmental and labor regulations.

Question 23

Highly indebted poor countries (HIPCs) can bootstrap themselves out of poverty by pursuing retaliatory trade policies rather than free trade policies.

Question 24

Which of the following best illustrates the globalization of production?

A)Daily Diamonds Inc. buys diamonds from South Africa and exports them to India for the cutting process.
B)Evan Swan, a U.S.-based fashion designer, is planning to open a flagship store in China to serve the Asian market.
C)Uncle Crab, a U.K. fast food chain, has been serving customers worldwide through its franchises.
D)Silver Unicorn Inc. uses sales personnel from the respective host country to sell its products and services.
E)Pizza Gallery, an Italian pizza chain, customizes its pizzas and pastas to suit the tastes of its American and Australian customers.

Question 25

Which of the following refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors such as labor, energy, land, and capital?

A)Globalization of markets
B)Containerization of production
C)Dispersal of production
D)Globalization of production
E)Industrialization of markets

Question 26

Managers in an international business must find ways to work around the limits imposed by specific governmental institutions.

Question 27

It is possible that economic growth in developed nations has offset the fall in the share of national income enjoyed by unskilled workers, raising their living standards.

Question 28

Which of the following services CANNOT be outsourced to foreign nations?

A)Debugging software
B)Handling consumer queries
C)Transcribing medical files
D)Interpreting MRI scans
E)Delivering closing arguments for a lawsuit

Question 29

Despite all the talk about the emerging global village, differences between countries such as cultures and political systems are very profound and enduring.

Question 30

What is the shift toward a more integrated and interdependent world economy called?

A)International trade
B)Foreign direct investment
C)Globalization
D)Moore's Law
E)Containerization

Question 31

Which of the following has been reduced as a result of globalization?

A)Volume of goods and services
B)Foreign exchange transactions
C)Environment and labor laws
D)Differences in material culture
E)Regulation of markets

Question 32

West Electronic Corporation sources goods and services for its electronics products from different locations around the globe in an attempt to take advantage of differences in the cost and quality of labor and land. This practice demonstrates the:

A)globalization of production.
B)globalization of markets.
C)dislocation of a developing nation's economy.
D)restriction on foreign direct investment.
E)regulation of the environment.

Question 33

Automobile companies promote different car models in different countries depending on a range of factors such as demographics, local taste, local fuel costs, income levels, traffic congestion, and cultural values. This most likely demonstrates that:

A)significant differences still exist among national markets.
B)cultural diversity has been replaced by global uniformity.
C)the global market is less complex than national markets.
D)only multinational giants can benefit from the globalization of markets.
E)the social norms in a country do not affect purchase decisions of consumers.

Question 34

According to many influential economists, the increase in international trade and cross-border investment will result in an increase in the prices of goods and services.

Question 35

Early outsourcing efforts were primarily confined to:

A)accounting services.
B)manufacturing activities.
C)testing services.
D)educational activities.
E)consulting services.

Question 36

Which of the following statements best supports the claim that greater uniformity replaces diversity in the context of global markets?

A)Differences in business systems and legal regulations lead companies to customize their marketing strategies, product features, and operating practices to best match conditions in a particular country.
B)As rival global firms follow each other across countries, they bring with them their brand names, products, and marketing strategies from other national markets, thus creating homogeneity across markets.
C)Truly innovative companies succeed by developing products that serve specific needs of the local markets.
D)The volume of goods, services, and investment crossing national borders has expanded at a slower rate than world output for more than half a century.
E)The most global of markets are not typically markets for consumer products, as significant differences in consumer tastes and preferences still exist among national markets.

Question 37

The move toward a global economy has strengthened the adoption of conservative economic policies by developing nations.

Question 38

Many of the former Communist nations of Europe and Asia seem to share a commitment to democratic policies and free market economies.

Question 39

The growing income inequality is a result of the wages for skilled workers being discounted.

Question 40

Which of the following was established after the Uruguay Round to police the international trading system?

A)United Nations
B)International Monetary Fund
C)Group of Twenty
D)World Trade Organization
E)World Bank

Question 41

Which of the following was a part of the agenda of the Doha Round of talks launched by the WTO?

A)Limiting the use of antidumping laws
B)Abolishing the International Monetary Fund
C)Increasing tariffs on industrial goods, services, and agricultural products
D)Persuading member governments to cut defense spending
E)Establishing GATT as a replacement for the WTO

Question 42

Which of the following is a macro factor underlying the trend toward greater globalization?

A)Rise of communism across the globe
B)Increase in nationalization of private organizations
C)Increase in diversity in consumer tastes and preferences
D)Increase in trade regulations across the globe
E)Dramatic developments in information processing and other technologies

Question 43

Which of the following is most likely to be observed in today's global economy?

A)Increasing U.S. share of world output
B)Large U.S. entrepreneurial firms dominating the international business scene
C)Increasing U.S. dominance in the world economy and world trade picture
D)Most of the nations being governed by centrally planned economies of the communist world
E)Rapid rise in the share of world output accounted for by developing nations such as China and India

Question 44

Which of the following is an argument put forth by critics of the IMF?

A)It increases barriers to the free flow of goods and investment across national borders.
B)It provides assistance only to developing nations and completely ignores the developed nations.
C)It is not powerful enough to ensure that the nation-states adhere to the rules laid down in trade treaties.
D)It promotes the rise of communism across the globe.
E)It usurps the sovereignty of nation-states by telling governments what economic policies they must adopt.

Question 45

The 1993 Uruguay Round:

A)increased trade and investment barriers.
B)excluded the trade of services from international trade.
C)transformed the World Trade Organization into the GATT.
D)provided enhanced protection for patents, trademarks, and copyrights.
E)promoted the worldwide rise of communism.

Question 46

According to the UN Charter, one of the four purposes of the UN is to:

A)be a center for harmonizing the actions of nations.
B)encourage high tariffs on imports of manufactured goods.
C)provide enhanced protection for patents.
D)promote the establishment of multinational treaties.
E)facilitate globalization of production.

Question 47

The motive behind the high tariffs imposed by nations on imports of manufactured goods, prior to World War II, was to:

A)deter any possible attempts to promote communism.
B)protect domestic industries from foreign competition.
C)prevent the occurrence of the Great Depression.
D)safeguard patents, copyrights, and trademarks.
E)promote the trade of services over the trade of manufactured goods.

Question 48

For foreign direct investment (FDI) to occur, a firm should primarily:

A)conduct cross-border bartering with neighboring countries.
B)invest resources in business activities outside its home country.
C)export goods or services to consumers in another country.
D)import goods or services from producers in another country.
E)erect formidable barriers to international trade.

Question 49

Which of the following reasons contributed to the Great Depression of the 1930s?

A)Inability to meet the increasing world demand for products
B)Several countries accepting General Agreement on Tariffs and Trade
C)Increasing attack from foreign competitors on domestic industries
D)Privatization of state-owned organizations
E)Countries progressively raising trade barriers against each other

Question 50

Which of the following best exemplifies foreign direct investment (FDI)?

A)Pure Pearls, a jewelry store in the United States, imports harvested pearls from Indonesia, Philippines, and Australia.
B)Chivalry, a U.S.-based phone manufacturing company, has set up its own assembly plant in Japan to cater to the needs of the Asian market.
C)Delicate Love, a reputable florist company in Holland, exports tulips and roses throughout the globe.
D)Samantha started an Italian restaurant in her home country, the United States, after she took cooking lessons from a well-known chef in Italy.
E)Yin and Yang Inc., a Chinese firm, supplies buttons and zippers to major denim brands in the United Kingdom.

Question 51

Which of the following has been declining in the developing nations of the world such as China, India, Russia, Indonesia, Thailand, South Korea, Mexico, and Brazil?

A)Economic opportunities for international trade
B)Industrialization
C)Contribution toward the share of world output
D)The stock of foreign direct investment
E)Barriers to the free flow of goods, services, and capital

Question 52

The lowering of trade and investment barriers:

A)protects domestic industries from foreign competition.
B)was not an agenda of the Uruguay Round.
C)allows firms to base production at optimal locations outside their home country.
D)creates an unfavorable environment for FDI.
E)caused the Great depression of the 1930s.

Question 53

Who, along with representatives from the European Union and the European Central Bank, represent the 19 largest economies in the world on the G20?

A)Finance ministers and central bank governors
B)Presidents and defense ministers
C)Prime ministers and army chiefs
D)International trade ministers
E)Ministers of foreign affairs

Question 54

Richard purchased a computer for $600 in 2014. Compared to the $900 computer that he had purchased way back in 2010, the new one seems to be more efficient in terms of the price he has paid and the power of the microprocessor technology. This is best explained by:

A)product liability.
B)property rights.
C)Moore's law.
D)purchasing power parity.
E)sustainable strategies.

Question 55

While the lowering of trade barriers made globalization of markets and production a theoretical possibility, which of the following has made it a tangible reality?

A)The advances in communication, information processing, and transportation technologies
B)The rise of communism and the need for independent economies on a global scale
C)The increasing diversity in consumer tastes and preferences worldwide
D)The increasing differences in the material culture the world over
E)The decreasing significance of the World Trade Organization

Question 56

Michelle, an Italian fashion designer, sells her merchandise by exporting them to the United States, United Kingdom, and Brazil. According to this information, Michelle is most likely involved in:

A)foreign direct investment.
B)globalization of production.
C)international trade.
D)multinational enterprise.
E)outsourcing.

Question 57

Gerald bought his son, David, a computer two years ago. Recently, he decided to buy his daughter, Julian, a computer of her own. In the context of the two-year gap between the purchase of both the computers and Moore's law, it is most likely that:

A)Gerald paid a higher price for Julian's computer.
B)David's computer will have a microprocessor with better power than that of Julian's.
C)both David's and Julian's computers would cost Gerald the same price.
D)the microprocessor in Julian's computer will be more advanced in terms of power than that of David's.
E)the power of the microprocessors, in both David and Julian's computers, would be the same.

Question 58

Which of the following countries has seen a relative decline in its share of world output between 1960 and 2012?

A)United States
B)Thailand
C)Japan
D)China
E)South Korea

Question 59

Why was the World Bank set up?

A)To preserve peace through international cooperation
B)To promote economic development
C)To maintain order in the international monetary system
D)To formulate a coordinated policy response to financial crises
E)To police the world trading system

Question 60

The advent of containerization has:

A)made the economies of the world's nation-states less intertwined.
B)made moving goods from one mode of transport to another extremely labor-intensive.
C)significantly lowered the costs of shipping goods over long distances.
D)slowed down the globalization of markets and production.
E)increased costs of coordinating and controlling a global organization.

Question 61

Which of the following statements reflects the trend in the changing nature of multinational enterprises?

A)Global business activity is increasingly being dominated by large U.S. multinational corporations.
B)The number of medium-size and small multinationals is decreasing continuously.
C)The ranks of the world's largest 100 multinationals are dominated by firms from developing economies.
D)The Internet is increasing the barriers that small firms face in building international sales.
E)International business is conducted not just by large firms but also by medium-size and small enterprises.

Question 62

What are mini-multinationals?

A)Multinational firms from relatively small countries in terms of area
B)Multinationals from the developing nations of the world
C)Multinational firms that operate in only one foreign country
D)Medium-sized and small multinationals
E)Subsidiaries of large multinationals in foreign countries

Question 63

Which of the following refers to the total cumulative value of foreign investments?

A)Purchasing power parity
B)Multipoint pricing
C)Stock of foreign direct investment
D)Switch trading
E)Bill of lading

Question 64

Which of the following has increased in the United States as a result of globalization?

A)Unemployment rate
B)Price of goods and services
C)Demand for unskilled workers
D)Standard of living
E)Income equality between workers in skilled and unskilled sectors

Question 65

Globalization critics argue that the decline in unskilled wage rates in advanced economies is due to the:

A)migration of low-wage manufacturing jobs offshore.
B)technology-induced shift toward jobs that require significant education and skills.
C)increased supply of highly skilled workers.
D)decreasing demand for unskilled workers in developing nations.
E)reducing national differences in the cost of labor between developed and developing nations.

Question 66

Which of the following identifies the motivation for much of the foreign direct investment by non-U.S. firms?

A)The desire to disperse production activities to optimal locations
B)The need to suppress emerging economies such as China, India, and Brazil
C)The demand for skilled workers in foreign nations
D)The lack of adequate environmental regulations
E)The establishment of multinational treaties

Question 67

Growing income inequality between the skilled and unskilled workers in advanced nations, such as the United States, is a result of the:

A)wages for skilled workers being bid up by the labor market and the wages for unskilled workers being discounted.
B)decrease in the outsourcing of low-wage manufacturing jobs offshore and a corresponding increase in demand for unskilled workers.
C)shift within advanced economies toward jobs where the only qualification is the willingness to turn up for work every day.
D)increasing wage gap between developing and developed nations.
E)shortage of unskilled workers and an excess supply of highly skilled workers.

Question 68

Which of the following statements reflects the changing demographics of the global economy?

A)U.S. dominance in export markets has waned as Japan, Germany, and a number of newly industrialized countries have taken a larger share of world exports.
B)The change in the position of the United States in terms of the share of world output is the result of the absolute decline in the health of the U.S. economy.
C)From 1960 to 2010, countries that experienced a large decrease in their share of world output include Japan, Thailand, Malaysia, Taiwan, and South Korea.
D)The United States is the only developed nation to see its relative standing in the share of world output slip.
E)Today, roughly half the globe-the centrally planned economies of the communist world-is off-limits to Western international businesses.

Question 69

Critics of globalization say that exporting jobs to low-wage nations results in higher unemployment and lower living standards in their home nations. Which of the following statements does NOT support this argument?

A)Globalization destroys manufacturing jobs in wealthy advanced economies.
B)Globalization demonstrates a structural adjustment to a more integrated global economy.
C)Globalization results in depressed wages in developed nations.
D)Globalization leads to economic dislocation in most cases.
E)Globalization induces a decline in the share of labor in national income.

Question 70

In the past two decades, the majority of Latin American countries have:

A)experienced a decline in the health of their economies.
B)sold state-owned enterprises to private investors.
C)been characterized by low growth, high debt, and hyperinflation.
D)restricted investment by foreign firms.
E)discouraged both democracy and free market reforms.

Question 71

Which of the following conditions is most likely to act as a deterrent for foreign firms willing to do business with former communist nations of East Europe and central Asia?

A)The high levels of economic development in these countries
B)The signs of growing unrest and totalitarian tendencies seen in these countries
C)A strong commitment to market-based economic systems seen in these countries
D)The collapse of communism in these countries
E)Low returns involved in doing business in these countries

Question 72

Which of the following statements is a general implication of globalization?

A)Globalization is inevitable.
B)From a purely economic perspective, globalization is all good.
C)Globalization has no negative impacts on the economies of the developed world.
D)Globalization has reduced the risks associated with global financial contagion.
E)As a result of globalization, a severe crisis in one region of the world can affect the entire globe.

Question 73

Silver Fire Electric Inc., a U.S.-based company, has productive activities in more than two countries. As a result, it would be most appropriate to refer to Silver Fire Electric as what type of enterprise?

A)Greenfield
B)Universal
C)Private
D)Multinational
E)Public

Question 74

"Exporting jobs" to low-wage nations has contributed to:

A)higher living standards in those countries that "export" the jobs.
B)higher unemployment in wealthy advanced economies such as the United States.
C)an increase in the income levels in those nations that "export" the jobs.
D)lower standards of living in those countries to which the jobs are exported.
E)reduced specialization in the production of goods and services.

Question 75

Which of the following statements reflects the nature of the global economy of the twenty-first century?

A)National economies are becoming less integrated into a single and interdependent economic system.
B)The number of nations joining the ranks of the developed world has reduced.
C)Countries have extensively adopted liberal economic policies.
D)There are fewer instances of state-owned businesses privatized and markets being opened to more competition.
E)The world is currently moving toward an economic system that is more unfavorable for international business.

Question 76

Universal Lingo, a U.K.-based language translation company employing just 65 people worldwide, has an annual turnover of $1.5 million. In this context, Universal Lingo is most likely to be classified as a(n):

A)large domestic firm.
B)mini-multinational firm.
C)greenfield firm.
D)foreign firm.
E)multinational giant.

Question 77

Which of the following has seen a positive change from 1960 to 2012?

A)Growth of the centrally planned economies of the communist world
B)U.S. position in the world economy and world trade picture
C)The share of world output enjoyed by rich industrialized countries such as Great Britain, Germany, and Japan
D)The share of world output accounted for by developing nations
E)Prevalence of independent and self-contained national economies

Question 78

An argument in support of the falling barriers to international trade and investment is that the falling barriers:

A)prohibit countries from specializing in the production of goods and services.
B)drive the global economy toward greater prosperity.
C)reduce the need to export jobs overseas.
D)increase the bargaining power of business firms by decreasing the incomes of consumers.
E)reduce attacks from foreign competitors.

Question 79

Due to the changing economic geography, many of tomorrow's economic opportunities are most likely to be found in the:

A)rich industrialized nations of the world like Great Britain and Germany.
B)centrally planned economies of the communist world.
C)United States.
D)developing nations of the world such as China, India, and Brazil.
E)countries that are currently not members of the World Trade Organization.

Question 80

Supporters of globalization insist that dislocation in the form of lost jobs is a trade-off that will ultimately lead to the economy being better off. Which of the following is being justified in this case?

A)Protectionism and retaliatory trade policy
B)Free trade of goods and services
C)Rise of communism
D)High tariff on imports of manufactured goods
E)The need to be a self-contained nation