Deck 12: International Trade and Investment

Question 1

Between 1965 and 2005 exports (in terms of value)of which commodity has grown the most?

A) food, beverages & tobacco
B) chemicals
C) crude materials
D) mineral fuels
E) machines and transport equipment

Answer 1

E

Question 2

When international trade occurs between different affiliates of the same company,it is called

A) multinational trade.
B) intracorporate trade.
C) intermultinational trade.
D) international trade.
E) intranational trade.

Answer 2

B

Question 3

What caused the increase in the competitive rivalry among industrialized countries in the late 20th Century?

A) rising ethnic nationalism
B) failure of the World Trade Organization policies
C) slower and unstable growth rates
D) energy shortages
E) declining population growth rates

Answer 3

C

Question 4

What is the correct chronological order of changes that affected the world economy in the late twentieth century?

A) (1)Massive geopolitical realignments occurred; (2)Slowdown in economic growth rates in industrialized countries; (3)Competitive rivalry among industrialized countries increased significantly; (4)Global financial markets underwent a profound series of alterations.
B) (1)Slowdown in economic growth rates in industrialized countries; (2)Competitive rivalry among industrialized countries increased significantly; (3)Global financial markets underwent a profound series of alterations; (4)Massive geopolitical realignments occurred.
C) (1)Global financial markets underwent a profound series of alterations; (2)Massive geopolitical realignments occurred; (3)Slowdown in economic growth rates in industrialized countries; (4)Competitive rivalry among industrialized countries increased significantly.
D) (1)Competitive rivalry among industrialized countries increased significantly; (2)Global financial markets underwent a profound series of alterations; (3)Massive geopolitical realignments occurred; (4)Slowdown in economic growth rates in industrialized countries.
E) (1)Competitive rivalry among industrialized countries increased significantly; (2)Massive geopolitical realignments occurred; (3)Global financial markets underwent a profound series of alterations; (4)Slowdown in economic growth rates in industrialized countries.

Question 5

By what name do we call the specialization of different countries within a global division of labor?

A) international integration
B) labor specialization
C) spatial interaction
D) international labor cooperation
E) World Trade Organization

Question 6

Where does barter or countertrade occur today?

A) in modernizing markets in developing countries
B) in growing markets in newly industrializing countries
C) in traditional markets in underdeveloped countries
D) in post-industrial markets in the industrially advanced countries
E) in capitalist markets in industrial countries

Question 7

Free trade is best from the standpoint of

A) efficiency.
B) profitability.
C) fairness.
D) labor.
E) raw materials.

Question 8

According to Michael Porter's Theory of Competitive Advantage,what factor most determines economic success?

A) cheap labor
B) cheap raw materials
C) growth in productivity
D) absence of government regulation
E) presence of government regulation

Question 9

Under David Ricardo's theory of comparative advantage,to what does each country allocate its resources?

A) to education and health care
B) to corporations and the wealthy, so that resources and wealth can trickle down through the rest of the economy
C) to science, technology, and the military
D) to the good that it can produce most efficiently compared to its trading partners
E) to the poor

Question 10

What are the elements of international business?

A) goods
B) services
C) information
D) capital
E) all of the above

Question 11

Reasons for worsening terms of trade include

A) decline in prices of primary commodities.
B) World Bank exchange rates.
C) comparative advantage of less developed countries.
D) technological advances in less developed countries.
E) all of the above.

Question 12

What is the MOST important shortcoming of trade theories?

A) They generally ignore scale economies and transportation costs.
B) They assume homogeneous products and perfect competition.
C) They fail to incorporate the role of firms, especially multi-national corporations.
D) They ignore governmental intervention.
E) all of the above

Question 13

What happened to the level of world trade between 1980 and the present?

A) World trade jumped from $2 trillion to over $5 trillion.
B) World trade dropped from over $5 trillion to about $3 trillion.
C) World trade rose from $2 trillion to $4 trillion in 1995, but has since dropped to about $3 trillion.
D) World trade dropped from $4 trillion to about $2 trillion in 1995, then rose to its current level of $5 trillion
E) World trade held steady between 1980 and the present.

Question 14

Who introduced the idea of comparative advantage?

A) Alfred Weber
B) Walter Christaller
C) Johann Heinrich Von Thunen
D) Thomas Malthus
E) David Ricardo

Question 15

World-systems theorists such as Wallerstein argue that an artificial division of labor has made earning a good income from free trade difficult for most

A) countries and corporations.
B) transnational corporations (TNCs).
C) multinational corporations (MNCs).
D) more developed countries (MDCs).
E) less developed countries (LDCs).

Question 16

Inadequacies of trade theories include all of the following EXCEPT

A) they often assume perfect knowledge of international trading opportunities.
B) they often include the assumption of homogeneous products.
C) they fail to adequately account for the role of multinational corporations.
D) All of the above are inadequacies.
E) A and B only are inadequacies.

Question 17

What was the cause of the slowdown in the economic growth rates of industrialized countries in the mid-to-late 1970s?

A) government anti-inflation policies
B) international free trade agreements
C) the Cold War
D) increase in oil prices
E) all of the above

Question 18

Taken together,labor,capital,technology,entrepreneurship,and land containing raw materials are called

A) factors of consumption.
B) comparative advantage.
C) terms of trade.
D) demand conditions.
E) factors of production.

Question 19

Obstacles to countries that export include all of the following EXCEPT

A) inflation.
B) exchange rates.
C) frequent internal labor disputes.
D) government intervention.
E) all of the above

Question 20

Which country was instrumental in creating an unfair global division of labor?

A) Germany
B) China
C) Russia
D) Britain
E) Japan

Question 21

All of the following attributes combine to increase or decrease a nation's global competitive advantage EXCEPT

A) factor conditions.
B) demand conditions.
C) supporting industries.
D) firm strategy, structure and competition.
E) comparative advantage.

Question 22

Constraints to FDI include all of the following EXCEPT

A) tax restrictions in foreign countries.
B) fluctuating currencies.
C) differences in government policies.
D) cultural differences.
E) differences in laws.

Question 23

According to Porter,productivity growth is a reflection of

A) the education and skills of the labor force.
B) available capital and technology.
C) government policy and infrastructure.
D) all of the above.
E) A and B only.

Question 24

What country is the largest debtor nation in the World?

A) Russia
B) Haiti
C) Yemen
D) United States
E) Japan

Question 25

Which of the following statements about eurocurrencies is FALSE?

A) They are bank deposits that are not subject to domestic banking legislation.
B) They offer investors lower rates of return in exchange for the tax benefits.
C) They were formerly called eurodollars.
D) The U.S. dollar represents about 80% of all eurocurrencies.
E) 50% of this market is in Europe.

Question 26

All of the following are factors conditions EXCEPT

A) human resources.
B) government regulations.
C) capital resources.
D) knowledge-based resources.
E) infrastructure.

Question 27

A barrier to efficient distribution of money and capital throughout the world is

A) personal preferences of investors.
B) practices of investment banking houses.
C) governmental intervention.
D) all of the above.
E) none of the above.

Question 28

Which is NOT a result of the U.S.trade deficit?

A) falling prices for domestic items
B) a large U.S. foreign debt
C) foreign investors are buying assets in the U.S.
D) all of the above are results
E) none of the above are results

Question 29

When the dollar appreciates in foreign-exchange markets relative to other currencies,it can

A) buy more goods and services from other countries.
B) buy fewer goods and services from other countries.
C) buy a steady amount of goods and services from other countries.
D) buy more goods but fewer services from other countries.
E) buy fewer goods but more services from other countries.

Question 30

When did the U.S.begin to experience a trade deficit?

A) 1770s
B) 1860s
C) 1920s
D) 1970s
E) 1990s

Question 31

If the value of a currency fluctuates according to changes in supply and demand for the currency on the international market,the exchange rate is said to be

A) in trouble.
B) floating.
C) optimal.
D) unsecured.
E) in demand.

Question 32

Which statement about why exchange rates fluctuate is FALSE?

A) Increased demand for foreign currency raises the exchange rate of the exporting country.
B) Rising inflation in a country will depreciate its currency; which will make its products more attractive to its trading partners.
C) An increase in demand for foreign goods decreases domestic demand and depreciates currency.
D) If domestic interest rates rise, that country's currency may depreciate.
E) Currency speculation affects exchange rates.

Question 33

What are the components of the global expansion of the financial system?

A) currencies
B) banking
C) capital markets
D) all of the above
E) A and B only

Question 34

Factors or characteristics of countries or regions that encourage innovation include

A) adaptation.
B) risk taking.
C) entrepreneurship.
D) investment in R & D.
E) all of the above.

Question 35

What is the difference between direct investment and portfolio investment?

A) Direct investment is within one's own country; portfolio investment is international in scope.
B) Direct investment focuses on management of labor; portfolio investment focuses on land.
C) Portfolio investment involves a subsidiary; direct investment does not.
D) Direct investment includes managerial control of a foreign company; portfolio investment does not.
E) Portfolio investment is the first stage that leads to direct investment.

Question 36

Firms seek to increase their profits through foreign direct investment through which means?

A) by obtaining natural or human resources in another country
B) to penetrate markets in another country
C) the uncertainties of investing in another country
D) all of the above
E) A and B only

Question 37

What is the primary reason for a firm to "go international" (i.e.,engage in foreign direct investment)?

A) avoid government regulations
B) increase markets
C) profit
D) keep pace with competitors
E) win hearts and minds

Question 38

What country leads the world in Foreign Direct Investment?

A) France, since the 1980s
B) United States, but its share of the total is slipping
C) Japan, since the oil shocks of the 1970s
D) Great Britain, with England leading the way
E) Germany, based on its Volkswagen automobile factories

Question 39

Competitive advantage is determined by

A) skilled labor.
B) a culture that rewards innovation.
C) competitive markets at home.
D) all of the above.
E) A and B only.

Question 40

Banks from what countries were the first to be established overseas?

A) Switzerland and Germany
B) Japan and China
C) Britain and France
D) United States and Canada
E) Australia and New Zealand

Question 41

All of the following are nontariff barriers to international trade,EXCEPT

A) a tax levied on an imported product.
B) quotas.
C) export-restraint agreement.
D) discretionary licensing standards.
E) health and safety regulations.

Question 42

Which country is the lead FDI investor in the U.S.?

A) Britain
B) Germany
C) France
D) Japan
E) Canada

Question 43

Major arguments for protectionism include all of the following EXCEPT

A) it saves domestic jobs.
B) it is necessary because it reduces dependence on foreign sources of strategic goods.
C) it produces large sources of income for government through tariffs.
D) All of the above are arguments.
E) A and B

Question 44

Why is the United Kingdom the U.S.'s chief foreign investor?

A) It needs the raw materials found in the U.S.
B) cultural affinities and lack of language barriers
C) Wages are cheaper in the U.S. than in U.K.
D) A free trade agreement exists between the two countries.
E) all of the above

Question 45

Effects of tariffs and quotas include all of the following EXCEPT

A) comparative advantage of supplying nations is not diminished.
B) the development and expansion of inefficient industries.
C) less international trade.
D) higher costs for consumers.
E) supplying countries have a smaller market in the to which they export.

Question 46

Which state receives the most FDI?

A) California
B) New York
C) Texas
D) Illinois
E) Michigan

Question 47

Foreign direct investment in the developing world has focused on all of the following countries,EXCEPT

A) Nigeria.
B) China.
C) Brazil.
D) Mexico.
E) Malaysia.

Question 48

FDI is considered a positive development in less developed countries for all of the following reasons EXCEPT

A) it raises, invests and reallocates capital.
B) it creates organization.
C) it encourages innovation and transfer of technology.
D) it contributes to the educational systems of the countries invested in.
E) it encourages distribution of products as well as marketing and sales.

Question 49

Most global FDI originates in all of the following countries EXCEPT

A) France.
B) China.
C) Germany.
D) United States.
E) Japan.

Question 50

Governments stimulate trade through

A) doing away with export subsidies.
B) market research.
C) providing information to exporters about export opportunities.
D) supporting international trade shows.
E) providing free trade zones.

Question 51

Which of the following regional patterns of FDI in the U.S.is INCORRECT?

A) Canada; along the U.S.-Canadian border
B) Europe; Middle Atlantic and Great Lakes states
C) Asia; Pacific region
D) Mexico; U.S.-Mexico border
E) All of the above are correct.

Question 52

Negative effects of FDI on receiving countries include All of the following EXCEPT

A) foreign firms can bankrupt local producers.
B) foreign firms may not improve the receiving country's balance of payments.
C) denationalization of local industries may occur.
D) its demands for government benefits may cripple the economy of the receiving country.
E) maximizing corporate profits will inevitable maximize the benefits to receiving countries.

Question 53

Examples of nontariff barriers include all of the following EXCEPT

A) quotas.
B) export-restraint agreements.
C) licensing standards.
D) duties.
E) detailed health regulations.

Question 54

What is the name used to describe firms that settle for less than the optimal?

A) Marginalizers
B) Satisficers
C) Infant industries
D) Market seekers
E) Portfolio investors

Question 55

What is the view of people on the right of the political spectrum regarding the presence of multinationals in less developed countries?

A) Multinational firms are counterproductive to development.
B) Multinational firms have little effect one way or the other on economic development.
C) Multinational firms need regulation in LDCs.
D) Multinational firms have a high potential to aid the development process in LDCs.
E) Multinational firms are detrimental to the environmental quality of LDCs.

Question 56

GATT (General Agreement on Tariffs and Trade)was the forerunner of what international organization of today?

A) North American Free Trade Agreement (NAFTA)
B) European Union (EU)
C) United Nations (UN)
D) International Monetary Fund (IMF)
E) World Trade Organization (WTO)

Question 57

Which of the following is NOT a characteristic that corporations prefer to find in countries in which they invest?

A) outward-oriented, export-led development strategy
B) offer incentives
C) cultural nationalism
D) imposition of few controls
E) appreciation of import substitutes that come with foreign investment

Question 58

What is the view of people on the left of the political spectrum regarding the presence of multinationals in less developed countries?

A) Multinational firms are counterproductive to development.
B) Multinational firms have little effect one way or the other on economic development.
C) Multinational firms do not need regulation in LDCs.
D) Multinational firms have a high potential to aid the development process in LDCs.
E) Multinational firms are beneficial to the environmental quality of LDCs.

Question 59

Which of the following is NOT a barrier to international trade and flows of factors?

A) infant industries
B) distance
C) if a firm is a satisficer
D) protectionism
E) tariffs

Question 60

What country has become a popular destination for Foreign Direct Investment since 1970,primarily because of its power and stability economically and politically as well as for its relatively inexpensive currency in world markets?

A) Brazil
B) Indonesia
C) United States
D) Nigeria
E) Poland

Question 61

According to Ricardo,large economies tend to be inefficient ones.

Question 62

Barter occurs nowhere on earth now.

Question 63

The argument that an artificial division of labor has made earning a good income from free trade difficult for most less developed countries is called competitive advantage.

Question 64

What must a country give up in order to be a member of the World Trade Organization?

A) a large membership fee
B) part of its sovereignty
C) some land that can be used for WTO functions
D) its language
E) all of the above

Question 65

The prices received for exports relative to the prices paid for imports is called the free market.

Question 66

Between 1965 and 2005 exports (in terms of value)of food,beverages and tobacco have grown the most.

Question 67

One of the important implications of Ricardo's comparative advantage model is that it shows how powerfully trade and exchange shape local production systems.

Question 68

What is the largest single trade bloc in the world today?

A) North American Free Trade Agreement
B) European Union
C) Association of Southeast Asian Nations
D) Latin American Free Trade Agreement
E) Organization of Petroleum Exporting Countries

Question 69

What was the objective of the eighth round of GATT in Uruguay?

A) removing barriers to international trade and services
B) ending limits on foreign economic investments
C) establishing and policing intellectual property rights
D) reducing agricultural trade barriers and domestic subsidies
E) all of the above

Question 70

All European countries adopted the euro EXCEPT

A) Britain.
B) Denmark.
C) Sweden.
D) all of the above
E) none of the above

Question 71

There are four levels of regional economic integration.What is their order,from lowest to highest level of integration?

A) (1)Customs union; (2)Free trade area; (3)Common market; (4)Economic Union
B) (1)Common market; (2)Customs union; (2)Free trade area; (4)Economic Union
C) (1)Free trade area; (2)Customs union; (3)Common market; (4)Economic Union
D) (1)Free trade area; (2)Customs union; (3)Economic Union; (4)Common market
E) (1)Economic Union; (2)Common market; (3)Free trade area; (4)Customs union

Question 72

Loans from the International Monetary Fund and the World Bank tend to uphold the basis of economic and foreign policy in what country?

A) Russia
B) Germany
C) Japan
D) United States
E) United Kingdom

Question 73

Internal labor disputes that interrupt production can be a barrier to exporting.

Question 74

What is the most inclusive transnational organization in the world?

A) World Bank
B) World Trade Organization (WTO)
C) European Union (EU)
D) Organization of Petroleum Exporting Countries (OPEC)
E) United Nations (UN)

Question 75

In 1999 major protests against the WTO were made famous by what phrase?

A) Battle in Seattle
B) Rumble in the Jungle
C) Fracas in Jamaicas
D) Showdown in Motown
E) Strain in Spain

Question 76

Effects of NAFTA include

A) forcing Mexican corn farmers into bankruptcy.
B) more than 600,000 U.S. jobs were lost.
C) undocumented border crossings have increased steadily.
D) all of the above.
E) none of the above.

Question 77

Governments erect barriers to flows of production factors such as

A) regulations on export of technology.
B) immigration laws.
C) capital controls.
D) all of the above.
E) A and C only.

Question 78

The ability of one country to produce a product at a lower cost than another country is comparative advantage.

Question 79

Which is NOT a stated goal of the EU?

A) the establishment of a common system of tariffs on imports to the Union
B) removal of tariffs and quotas on all products traded between partners
C) establishment of common agricultural, transportation and other policies
D) free movement of labor within the partner countries
E) removal of all agricultural subsidies

Question 80

Declines in transport costs have made it easier for regions to realize their comparative advantage.