Deck 3: International Institutions From an International Business Perspective

Question 1

The Bretton Woods Conference established the European Union currency, the euro.

Answer 1

False

Question 2

New institutional theory suggests that institutions be understood as collections of rules and codes of conduct that limit behavior.

Answer 2

True

Question 3

By and large, the UN record of facilitating business transactions has been minor.

Answer 3

False

Question 4

The Doha Development Agenda is an extended development plan for Doha, Qatar.

Question 5

Some think that renewed focus on exchange rates would be a good path forward for the IMF, which is struggling with core issues related to its purpose.

Question 6

The International Finance Corporation (IFC) acts as an investment banker, arranging private risk ventures in developing countries.

Question 7

One of the significant differences between formal and informal institutions is how they gain compliance.

Question 8

The United Nations operates with voluntary agreements, so it is essentially an informal institution.

Question 9

Recently, regional trade agreements have grown, a trend that may be seen to strengthen the WTO, according to the text.

Question 10

The World Bank funds infrastructure projects in developed countries.

Question 11

The UN Environment Programme laid the groundwork for the Climate Change Convention, which led to the Kyoto Protocol.

Question 12

The WTO has negotiated a TRIPS agreement whereby property rights do not take precedence over public health.

Question 13

As discussed in the chapter, institutions are organizations constructed to create jobs for government employment initiatives.

Question 14

Informal cognitive institutions are not important to international managers because such managers localize their hiring, and so they can draw on local talent.

Question 15

International institutions provide nations the opportunity to build multilateral solutions, and thus make significant contributions to international stability.

Question 16

The WTO supports trade with discrimination as a basic right of trading nations.

Question 17

Although India is a member of the WTO and has benefited greatly from increased trade as a result of WTO agreements, China is not yet a member.

Question 18

The UN International Court of Justice hears cases that involve disputes between national governments.

Question 19

Permanent members of the UN Security Council vote on Security Council measures, and only the secretary-general of the UN, Ban Ki-Moon, has veto power.

Question 20

The World Bank is made up of one large institution, IBRD.

Question 21

Examples of informal, normative institutions would include local town/city governments and the U.S. government.

Question 22

Cognitive institutions are important to the international manager because these institutions help the manager understand the schema operating in their international environments and are easily missed or misunderstood by the non-native, so schemas can easily lead to misunderstandings.

Question 23

The International Court of Justice (ICJ) handles all cases brought forward by any person or organization.

Question 24

Institutions are constructed to provide meaning and stability to social life, regulate the relations of individuals to each other, and limit behavior of individuals and firms.

Question 25

The EU is administered by the European Commission, a group composed of 27 commissioners elected at the EU level.

Question 26

All EU members use the euro and thus have given up part of their national sovereignty to the EU.

Question 27

As Kofi Annan, former secretary-general of the UN, observed, the UN exists to help us master the challenges of our common, global destiny, which we can do only if we face them together.

Question 28

Although the EU can influence the practices of businesses located in non-EU-member countries, Microsoft has been able to maintain business in the EU much as it conducts business in the United States.

Question 29

The UN General Assembly is the main staff organization responsible for the UN administration.

Question 30

The EU is a supranational body that has become, essentially, a regional government.

Question 31

Among trading blocs, the EU has the largest GDP per capita.

Question 32

Trading blocs always bring cost savings to international firms.

Question 33

Formal institutions operate through laws and regulations. They require members to make a written commitment.

Question 34

An important assumption that the IMF makes is that a strong organization with rules and penalties for their violation is necessary to support trade.

Question 35

An example of an informal, cognitive institution would be the celebration of Halloween.

Question 36

The EU has been unsuccessful at harmonizing customs and tax formalities within member nations' borders.

Question 37

In a customs union, common external tariffs are added to an existing FTA, as found in the Southern African Customs Union and Mercosur.

Question 38

ASEAN, whose initial goal was political, to foster peaceful relations among members, includes China as its core member.

Question 39

Economic cooperation often begins with a common market, as in the case of the EU.

Question 40

The following is an area in which the UN plays a significant role for international business: loaning seed money for entrepreneurial start-ups in developed nations.

Question 41

The major function of the World Bank is to serve as a:

A) nonprofit banking cooperative for its members to meet development needs.
B) central bank for the world's central bankers.
C) nonprofit cooperative to finance the educational needs of its members.
D) investor of funds in global businesses in order to create value for its shareholders.

Question 42

In a free trade area, members drop internal tariffs. External tariffs:

A) are dropped also.
B) are coordinated so that there is one agreed-upon set of external tariffs.
C) are maintained independently by each member.
D) do not apply to an FTA.

Question 43

The WTO exists to:

A) establish and help implement rules of trade among nations in order to increase trade flows.
B) monitor and reduce the amount of trade from developing nations to developed nations.
C) ensure that the industrial revolution continues to support the economies of developed nations.
D) B and C

Question 44

Economic integration often progresses:

A) in stages, from free trade area to customs union to common market.
B) in stages, totally dependent on the members' national economic strength.
C) as a result of cultural beliefs and economic strength.
D) in unpredictable ways due to unintended consequences.

Question 45

IMF quotas are determined by the relative size of a nation in the global economy and:

A) determine the weight of the nation's voting in the IMF.
B) determine how much a nation can borrow from the IMF.
C) are the nation's "dues" to the IMF.
D) all of the above.

Question 46

The EMU (European Monetary Union or Economic and Monetary Union) has established the euro, a currency that is used in:

A) all of the EU.
B) all of the EU and much of the rest of Europe.
C) 16 of the EU member-countries.
D) the Bank for International Settlements and the IMF.

Question 47

The Council of European Union, the primary policy-setting institution of the EU, is composed of:

A) the member-states' prime ministers or presidents.
B) the member-states' ministers who represent the specific area being discussed.
C) elected members from across Europe, elected by country.
D) appointed representatives from each member-state.

Question 48

Most African nations have their main trade relationships:

A) within local FTAs.
B) with other African nations due to transport costs.
C) with developed nations, often built on former colonial ties.
D) with China.

Question 49

ASEAN began as a defensive alliance of 10 Asian nations concerned about:

A) trade barriers in the West.
B) translation issues for their export products.
C) the spread of communism in their region.
D) Japan's influence in the region.

Question 50

The IBRD is a major institution of the World Bank whose function is to loan to:

A) countries whose income levels make them not creditworthy.
B) private-sector development-focused firms.
C) private individuals in developing nations whose entrepreneurial efforts support development.
D) middle-income and creditworthy poor nations.

Question 51

The Doha Development Agenda is:

A) a WTO plan to establish free trade among the emirates in the Persian Gulf.
B) the government seat of Qatar and source of significant WTO funding through Sheik Kalifa al-Thani.
C) a UN plan to develop the Arab Emirates to ensure their independence.
D) an extended conference of the WTO initially convened in Doha.

Question 52

Is the WTO's idea of "fair competition" really a code phrase for free trade?

A) Yes, the WTO is in favor of free trade and only free trade under all circumstances.
B) Not really. Trade relationships among nations can be exceedingly complex, and the WTO supports fair competition, which may mean freer trade rather than free trade.
C) Yes, the WTO stands for trade liberalization, which requires transparency, economic reform, and no protectionism, regardless of the member nation's economic situation.
D) Yes. The WTO supports free trade and the term fair competition is used to obtain buy-in from nations opposed to trade liberalization.

Question 53

NAFTA maintains restrictions on the movement of labor, a limitation that suggests it is:

A) a free trade area.
B) a common market.
C) not in compliance with WTO regulations.
D) B and C

Question 54

The EU's impact on international business is:

A) negligible, since the EU members tend to trade with each other.
B) not significant, since the EU members need to trade with other developed economies.
C) substantial, since EU standards, especially in the areas of ecology and sustainability, impact any firm that wants to do business in the EU.
D) substantial, since the EU is a major exporter into developing nations.

Question 55

The EU began as a common market for:

A) all imported goods from beyond Europe.
B) the textile and dairy industries.
C) the transportation industries.
D) the coal and steel industries.

Question 56

The impact of the EU on the WTO could be said to be negative, since:

A) a country could belong to only one of these organizations.
B) the favored trade relationships among EU members are not extended to nonmember countries, so the EU undercuts the WTO.
C) the euro threatens other hard currencies supported by the WTO, such as the dollar and the yen.
D) the WTO does not collect dues from EU member-nations.

Question 57

The IMF initially played a central role in:

A) establishing trade initiatives through GAAP measures.
B) supporting war-torn nations of Europe as they recovered from their devastation.
C) setting fixed exchange rates among nations' currencies with an established par value based on gold.
D) the monitoring of EU initiatives to restrain trade with South Africa.

Question 58

The WTO has made progress on trade-related intellectual property rights (TRIPS). An example of this progress is:

A) an agreement that property rights should not take precedence over public health.
B) an agreement that copyrights are inviolate.
C) a shared recognition that private property is a basic human right.
D) an agreement that governments should hold all pharmaceutical trade secrets.

Question 59

Regional trade agreements such as NAFTA can be seen to impact the WTO:

A) negatively, because they undercut the nondiscrimination principle of the WTO.
B) positively, because they extend most-favored-nation status to more nations.
C) negatively, because they compete with the WTO for membership, since nations can belong to only one trade group.
D) negatively, because the United States and the EU do not have a regional trade agreement between them.

Question 60

The Treaty of Rome, signed in 1957, established a common market for coal and steel for:

A) West Germany, Belgium, the Netherlands, France, Luxembourg, and Italy.
B) England, Ireland, Northern Ireland, Scotland, Wales, and France.
C) Finland, Sweden, Norway, West Germany, Denmark, and Switzerland.
D) Austria, Hungary, Slovakia, Poland, Romania, and Bulgaria.

Question 61

The UN's International Court of Justice (ICJ) is also known as:

A) the Court of Europe.
B) the Court of International Law and Regulations (CILR).
C) the International Court of Peace.
D) the World Court.

Question 62

The geographical area that receives the most International Development Association (IDA) credits and grants is:

A) East Asia.
B) Latin America and the Caribbean.
C) Africa.
D) Middle East.

Question 63

Informal institutions are composed of sets of:

A) mandatory agreements, a bit like the mind's software.
B) orthodox accords whose goal is to establish rigor.
C) agreements that are for the most part written and taken for granted.
D) voluntary agreements.

Question 64

In developing economies, informal institutions tend to play a greater role than in developed economies, possibly because

A) the developing economies have more ambiguity and lack formal institutions by definition, so informal institutions step into the breach.
B) developing economies show cultural preference for informality.
C) informal institutions emerge to give order to the unstructured, chaotic environment.
D) A and C

Question 65

The first principle of the WTO's five basic principles is trade without:

A) negotiation.
B) economic reform.
C) discrimination.
D) competition.

Question 66

The WTO is the only international organization designed to establish and help implement:

A) efforts at peace between nations.
B) rules of trade among nations.
C) security measures between nations.
D) strategic planning for developing nations.

Question 67

The main difference between a free trade area (FTA) and a customs union is that in a customs union, there is:

A) no need for passport controls.
B) a shared border patrol.
C) shared currency.
D) a common external tariff.

Question 68

The purpose of the International Financial Corporation (IFC) is to invest in companies and financial institutions in developing countries in order to build:

A) infrastructure.
B) trade routes.
C) domestic logistics.
D) domestic capital markets.

Question 69

This type of institution operates through laws and regulations, with coercion as the regulative mechanism.

A) formal
B) informal
C) normative
D) cognitive

Question 70

That the common interest of all nations in a workable international exchange rate system transcends their conflicting international interests is the premise of:

A) the International Monetary Fund (IMF).
B) the Bank for International Settlements.
C) the World Central Bank.
D) the World Bank for Reconstruction and Development.

Question 71

IDA's purpose is to loan to:

A) the poorest nations.
B) middle-level-income nations needing infrastructure.
C) developed nations for use in trade stimulus efforts.
D) any nation with collateral.

Question 72

At the end of World War II, the UN called for the conference that set up the World Bank and the IMF. This conference was:

A) convened in San Francisco.
B) held at Yalta.
C) held at Grasleben, Germany.
D) held at Bretton Woods, New Hampshire.

Question 73

The United Nations is probably the best known among:

A) for-profit organizations.
B) social service organizations.
C) international organizations.
D) military organizations.

Question 74

The Doha Development Agenda is:

A) a WTO conference on trade.
B) an agreement on climate control and greenhouse gases.
C) a decision-making approach to development.
D) a development rules list.

Question 75

The World Bank's two major institutions are the International Development Association and the:

A) Collateral-Based Lending Agency.
B) International Bank for Reconstruction and Development (IBRD).
C) International Microloan Bank.
D) International Bank for Development.

Question 76

The idea that WTO members treat all members equally is known as:

A) the transparency principle.
B) the fairness principle.
C) the equity and equality principle
D) the MFN (most-favored-nation) principle.

Question 77

Under new institutional theory, institutions can be categorized as formal and informal, and the informal institutions can be further categorized as:

A) normative and cognitive.
B) normal and abnormal.
C) informally cognitive and formally cognitive.
D) effective and ineffective.

Question 78

All UN member-countries belong to the UN's:

A) Peace Jurga.
B) General Assembly.
C) Internal Court of Justice.
D) Committee on Intelligence.

Question 79

The results of liberalized trade so far have been:

A) beneficial for developing economies.
B) harmful for developing economies.
C) unconnected to developed economies.
D) uneven for developing and developed economies.

Question 80

The Chinese concept of guanxi is an example of:

A) an informal, cognitive institution.
B) a regulative, formal institution.
C) a favorite cooking method of Chairman Mao.
D) taken-for-granted approaches to friendship relations.