Deck 7: Economic and Socioeconomic Forces

Question 1

A problem with gross national income estimates that,to compare them,the GNIs in local currency must be converted to a common currency by using an official exchange rate,and that may not accurately reflect domestic purchasing powers of currencies.

Answer 1

True
Explanation: A problem with gross national income estimates that, to compare them, the GNIs in local currency must be converted to a common currency by using an official exchange rate, and that may not accurately reflect domestic purchasing powers of currencies. Purchasing power parity is a means of adjusting the exchange rates for two currencies so the currencies have equivalent purchasing power.

Question 2

The Atlas conversion factor is the arithmetic average of the current exchange rate and the exchange rates in the two previous years.Incomes measured by the Atlas conversion factor are generally more stable over time and changes in income rankings are more likely to be due to relative economic performance than fluctuations in the exchange rate.

Answer 2

False
Explanation: The Atlas conversion factor is the arithmetic average of the current exchange rate and the exchange rates in the two previous years, adjusted by the ratio of domestic inflation to the combined inflation rates of the euro zone, Japan, the United Kingdom, and the United States. Incomes measured by the Atlas conversion factor are generally more stable over time and changes in income rankings are more likely to be due to relative economic performance than fluctuations in the exchange rate.

Question 3

When an international manager is considering where to do business,one of the first considerations is the size of the economy.

Answer 3

True
Explanation: When an international manager is considering where to do business, one of the first considerations is the size of the economy.

Question 4

In terms of economic development and competencies,India's strength so far has been in services whereas China's has been in manufacturing.

Question 5

Discretionary income is the amount left after paying taxes.

Question 6

The purpose of economic analysis is to assess the overall outlook of the economy and the impact of economic changes on the firm.

Question 7

Newspapers in China refer to young people with good jobs as "zippies."

Question 8

India's average manufacturing labor cost per hour in 2014 was about one-quarter as high as China's.

Question 9

Developed is the term given to nations that have achieved high income per capita.

Question 10

Economies with per capita incomes in the low to middle range that are in a transition toward developed status are referred to as emerging market economies.

Question 11

Differences in GNI/capita tell us something about the relative wealth of a nation's inhabitants,but we also need to know how the GNI is distributed.

Question 12

Purchasing power parity refers to the number of units of a currency required to buy the same amounts of goods and services in the domestic market that one dollar would buy in the United States.

Question 13

To compare the purchasing power of nations,managers need to know how many people gross national income (GNI)is divided among.

Question 14

To estimate market potential,managers require data on the size and the rates of change of economic and socioeconomic factors.

Question 15

Income distribution studies confirm the belief that income is more evenly distributed in the richer nations.

Question 16

A simple calculation based on GDP,total population,and income distribution may indicate that a country is not an adequate market.

Question 17

A common basis for assessing economic development is gross domestic income.

Question 18

International economic analyses should provide economic data on both actual and prospective markets.

Question 19

The international environment includes all the uncontrollable forces originating outside the home country that surround and influence the firm.

Question 20

Generally,it can be assumed,the higher the GNI/capita value,the more advanced the nation's economy.

Question 21

The percentage of household expenditures spent on consumer durables by households in developing nations is half the percentage spent by consumers in developed nations.

Question 22

Analysts know that a country with a large population is always a better market than a country with fewer people.

Question 23

The increase in the number of working women is significant because it may result in a greater market for convenience goods.

Question 24

The World Bank categories countries based on GNI per capita,using the following categories:

A) undeveloped economies, developing economies, developed economies.
B) developed economies, industrializing economies, developing economies.
C) developing economies, newly industrializing economies, developed economies.
D) high-income economies, middle-income economies, low-income economies.
E) less developed economies, more developed economies.

Question 25

According to the book,economic analyses become more complex when a firm enters overseas markets because,unlike the situation for a company operating domestically

A) the uncontrollable economic variables must be forecast.
B) management must operate in two new environments, foreign and international.
C) economists know less about foreign exchange rates.
D) analysts must now forecast the values for both socioeconomic and economic variables.
E) both the uncontrollable economic variables must be forecast and economists know less about foreign exchange rates.

Question 26

International economic analyses

A) provide data to governments regarding a company's prospective markets.
B) should providing economic data on actual and prospective markets.
C) are focused on economic conditions of nations in which a company's major competitors are located.
D) rely on published government data for input.
E) are primarily prepared for use by governments.

Question 27

Which of the following is not true about China,compared to India?

A) China has 1.12 million millionaires versus 182,000 in India as of the beginning of 2014.
B) China is ranked third in the world in sales of luxury goods, ahead of India.
C) China has a larger population, at 1.37 billion people, than does India.
D) China attracted five times more foreign direct investment from 2000 to 2013 than did India.
E) China has a higher level of manufacturing productivity than does India.

Question 28

Which of the following is not true about India,according to the text?

A) India has 300 million people 20 to 34 years of age.
B) India has a total population of 1.27 billion people, the third largest in the world.
C) India has 150 to 200 million people who are completely fluent in spoken English.
D) India has 6.1 students in college, versus only 3.4 million college students in China.
E) India generates 13 percent of its GDP from the manufacturing sector, versus 30 percent for China.

Question 29

Wages tend to vary more widely than hourly compensation because of the differences in the size of fringe benefits.

Question 30

A more even distribution of income and increased urbanization are among the factors acting to reduce the traditional family size.

Question 31

The rural-to-urban shift is occurring primarily in the developed countries.

Question 32

_______ refers to the total value of all income generated by the residents of a nation,including both the domestic production of goods and services and income from abroad.

A) Gross domestic product
B) Gross domestic income
C) Gross national income
D) Net national product
E) Goods and services income

Question 33

Countries with slower-rising unit labor costs are investment prospects for companies striving to lower production costs.

Question 34

According to the book,what is the purpose of economic analyses?

A) To anticipate political developments within and across countries.
B) To forecast exchange rates.
C) To assess the overall outlook for the economy and the impact of economic changes on the firm.
D) To anticipate the rate at which companies will develop new competitive strategies.
E) To provide well-paying jobs for economics graduates.

Question 35

The ________ includes all the uncontrollable forces originating outside the home country that surround and influence the firm.

A) foreign environment
B) international environment
C) host country environment
D) global environment
E) alien environment

Question 36

The quantity and mix of energy consumed per capita constitutes a rough indicator of a country's level of development.

Question 37

Because of the importance of economic information to the control and planning functions at headquarters the collection of data and preparation of reports is usually the responsibility of

A) the home office.
B) economists in the subsidiaries where changes are occurring.
C) economic consultants.
D) government economists.
E) industry associations.

Question 38

If a major part of the foreign exchange a nation earns cannot be used to import components used in local products,then either local industries must manufacture them or the companies that import them must stop production.

Question 39

The ________ includes the interactions between domestic and foreign environmental forces,or between sets of foreign environmental forces when an affiliate in one country does business with customers in another.

A) foreign environment
B) international environment
C) host country environment
D) global environment
E) alien environment

Question 40

The view that defines economic development as a reduction of poverty and employment as well as an increase in income is called the human development approach.

Question 41

Which of the following is not true regarding the Atlas conversion factor?

A) It was developed to reduce the impact of inflation-based changes on GNI estimates.
B) It is the arithmetic average of the current exchange rate and the exchange rates in the two preceding years, adjusted by the ratio of domestic inflation to the combined inflation rates of the euro zone, Japan, the United Kingdom, and the United States.
C) Incomes measured by the Atlas conversion factor are generally more stable over time.
D) Changes in income rankings are more likely to be due to relative economic performance than to fluctuations in the exchange rate.
E) Dissatisfaction with both the PPP and conversions using official exchange rates caused the World Bank to adopt the Atlas methodology to derive per capita GNI estimates.

Question 42

Which of the following is not true regarding the underground economy?

A) On average, for the 2000 to 2012 time period, it is estimated that the underground economy accounted for between 16 and 17 percent of GDP in OECD countries.
B) On average, for the 2000 to 2012 time period, it is estimated that the underground economy accounted for between 30 and 50 percent of GDP in emerging economies.
C) The underground economy is estimated to have exceeded 60 percent in Bolivia, Panama, and Zimbabwe.
D) The underground economy in the United States decreased from 8 percent of GDP in 1970 to less than 4 percent in 2003.
E) Large underground economies can create problems for public policy makers.

Question 43

A measure of how a nation's income is apportioned among its people is

A) gross national income.
B) gross domestic product.
C) income distribution.
D) the Atlas conversion factor.
E) purchasing power parity.

Question 44

According to the text,the part of a nation's income that,because of unreporting or underreporting,is not measured by official statistics is known as the

A) hidden economy.
B) gray market.
C) barter system.
D) underground economy.
E) shadow market.

Question 45

Economies with per capita incomes in the low to middle range that are in a transition toward developed status are known as

A) undeveloped economies.
B) socialist economies.
C) high-income economies.
D) emerging market economies.
E) less-developed economies.

Question 46

A measure of an economy's size based on the market value of goods and services produced within a nation in a year is

A) net national income.
B) gross domestic product.
C) gross national product.
D) gross national income.
E) the Gini coefficient.

Question 47

When an international manager is considering where to do business,one of the first considerations is

A) whether the country has a democratically elected government.
B) the dominant religion in the country.
C) the size of the country.
D) whether the country has a manufacturing sector.
E) the size of the economy.

Question 48

Which of the following is true regarding the Big Mac Index?

A) It is an index calculated by McDonald's to determine if their Big Mac sandwiches are properly priced within international markets.
B) It calculates a per capita level of Big Macs that are sold in various countries of the world.
C) It can indicate whether a particular currency is undervalued.
D) It compares the value of a Big Mac to other items in a basket of goods economists traditionally use for economic analyses.
E) It provides the empirical foundation for a trickle-down theory of economics called Burgernomics.

Question 49

The arithmetic average of the current exchange rate and the exchange rates in the two preceding years,adjusted by the ratio of domestic inflation to the combined inflation rates of the euro zone,Japan,the United Kingdom,and the United States,is known as

A) the Gini coefficient.
B) the Markov-Linder formula.
C) the Kolgorov coefficient.
D) the Zurich formula.
E) the Atlas conversion factor.

Question 50

GNI/capita,a crude estimate of purchasing power,must be further refined by

A) an examination of the amount of income tax paid.
B) a census to determine the total population.
C) incorporating data on how the national income is actually distributed.
D) determining the amount of discretionary income.
E) calculating the amount of tax avoidance by individuals and corporations.

Question 51

As a general rule,the underground economy in a country will be bigger when

A) tax rates are lower.
B) drug use is higher.
C) income levels are low.
D) government red tape is oppressive.
E) economic growth is slow.

Question 52

Dissatisfaction with both the purchasing power parity (PPP)and conversions using official exchange rates caused the World Bank to adopt what methodology to derive per capita GNI estimates?

A) Gini coefficients.
B) Atlas conversion factors.
C) The inflation-growth coefficient.
D) The Zurich formula.
E) The Human Development Index.

Question 53

A measure of the degree to which family income within a country is distributed equally is

A) gross national income.
B) the Gini index.
C) gross domestic product.
D) the Atlas conversion factor.
E) purchasing power parity.

Question 54

When measuring the value produced in an economy,most international organizations prefer to use

A) GNI.
B) GDP.
C) GNP.
D) PPP.
E) Gini.

Question 55

Most developed nations share the following characteristic(s):

A) disguised unemployment or underemployment.
B) access to health care and a wide range of health problems.
C) vigorous international trade, especially in agriculture and manufacturing.
D) a large base of productive capital.
E) plentiful educational opportunities and illiteracy.

Question 56

According to the text,which of the following is not one of the rationales for why most seasoned managers supplement their analyses by looking at economic growth rates as well as measures of an economy's absolute size?

A) Emerging and developing economies grew more than three times faster in 2012 and 2013 than did developed economies.
B) GNI forecasts on their own are of no value to managers conducting economic analyses.
C) Forecasts suggested that emerging and developing economies would grow at more than double the rate of developed economies in 2014 and 2015.
D) Data such as overall GNI or GNI per capita can provide a snapshot of the size of an economy, but they fail to inform a manager about whether and how fast an economy is growing, or perhaps even shrinking.
E) Rapid and rising economic growth rates suggest consumer demand, which often indicates that trade and foreign direct investment are likely to increase as well.

Question 57

Most developed nations share the following characteristic(s):

A) technological dualism.
B) high productivity and incomes in some regions and little economic development in others.
C) unequal distribution of income.
D) a large and dominant share of total output coming from manufacturing.
E) a substantial middle class.

Question 58

Generally,we can assume that the higher the GNI/capita value

A) the lower the tax rate.
B) the smaller the population.
C) the larger the population.
D) the more advanced the economy.
E) the higher the growth rate.

Question 59

Most developing nations share the following characteristic(s):

A) unequal distribution of income, with a very small middle class.
B) a broad range of products for export, usually based on basic manufacturing.
C) high savings rates.
D) a productive agricultural sector that supports much of the population.
E) political stability based on a nondemocratically elected government.

Question 60

The rate of growth of GNI/capita may be more important to marketers than just GNI/capita because

A) a stable rate indicates low risk for entry.
B) a high rate indicates a fast-growing market.
C) a high rate indicates economic instability.
D) low rates indicate political stability.
E) it indicates how much investment will be needed for entry.

Question 61

Unit labor costs will not rise in unison with wage rates if

A) the governments institute wage and price controls.
B) productivity decreases faster than wages increase.
C) the gains in productivity are greater than wage increases.
D) interest rates rise less than wage rates.
E) advertising costs decline.

Question 62

According to the text,primary reasons for relative changes in labor costs include increases or decreases in

A) hours worked.
B) total output.
C) inflation rates.
D) exchange rates.
E) level of education.

Question 63

From comparisons of income distribution studies over time,it appears that in early stages of development

A) income inequality decreases.
B) income inequality stays the same.
C) the upper and lower quintiles grow at the expense of the middle quintile.
D) the middle quintile grows at the expense of the upper and lower quintiles.
E) The upper quintiles grow at the expense of the middle and lower quintiles.

Question 64

According to the World Bank,populations in high-income economies use how much commercial energy per capita as do people in developing economies?

A) Half as much
B) Twice as much
C) Five times as much
D) Nearly seven times as much
E) More than 10 times as much

Question 65

The after-tax personal income of consumers is known as

A) personal savings.
B) discretionary income.
C) personal income.
D) disposable income.
E) free cash flow.

Question 66

The percentages of household expenditures spent on transportation,communication,and health care by residents of industrialized nations are _______________ the percentages spent by residents of developing nations.

A) half
B) two-thirds
C) equal to
D) twice
E) triple

Question 67

According to the text,a large international debt may result in

A) reduction in the level of component production at the local level.
B) decreased levels of foreign exchange available for importing components for local assembly.
C) increased numbers of importers.
D) growing levels of sales by home country factories that sell to the subsidiary in the indebted nation.
E) increasing consumer confidence.

Question 68

If a nation's GNI is small,but a small percentage of its population receives a large percentage of that income

A) it may be a good market for high-priced industrial products.
B) it may be a good market for high-volume, high-priced consumer products.
C) it may be a good market for low-volume, high-priced luxury products.
D) it is unlikely to be a promising market.
E) then there will be good growth in the future.

Question 69

The percentages of household expenditures spent on consumer durables by residents of industrialized nations are _______________ the percentages spent by residents of developing nations.

A) half
B) twice
C) equal to
D) triple
E) two-thirds

Question 70

Income distribution studies confirm the belief that,generally,income is more evenly distributed in the

A) richer nations.
B) developing nations.
C) newly industrialized nations.
D) Pacific Rim nations.
E) African nations.

Question 71

According to the text,the market analyst may determine a country is not a good market by making a simple calculation based on

A) GNI/capita, total population, and the size of the hidden economy.
B) GNI, total population, and income distribution.
C) GNI/capita, population by state or province, and the number of pharmacies.
D) Pet sales, number of CD players, and per capita lint production.
E) GDP, GDP growth rate, and tax burden.

Question 72

According to the text,primary reasons for relative changes in labor costs include increases or decreases in

A) compensation.
B) total output.
C) inflation rates.
D) hours worked.
E) level of education.

Question 73

The amount of income left after paying taxes and making essential purchases is known as

A) personal savings.
B) discretionary income.
C) personal income.
D) disposable income.
E) free cash flow.

Question 74

The percentages of household expenditures spent on food and beverages by residents of industrialized nations are _______________ the percentages spent by residents of developing nations.

A) half
B) twice
C) equal to
D) triple
E) two-thirds

Question 75

According to the text,commercial energy use per capita is related to the size of which of the following sets of modern sectors?

A) Commercial buildings, agriculture, transportation
B) Housing, agriculture, industry
C) Manufacturing, agriculture, housing
D) Urban areas, industry, motorized transport
E) Government, agriculture, industry

Question 76

According to the text,unit costs of labor will decrease even though the firm is required to pay more to workers,provided

A) management compensation decreases significantly.
B) productivity increases fast enough.
C) advertising costs are proportional.
D) interest rates rise slowly.
E) government regulations are eliminated.

Question 77

Because ____________ consumer expenditures eliminate differences in relative prices,marketers use these data to analyze how the composition of consumption changes with the level of development.

A) normalized
B) inflation-free
C) PPP-based
D) historical-cost
E) growth adjusted

Question 78

According to the text,as the level of a government's debt increases

A) a higher proportion of resources is invested into productive uses.
B) government investments will increase.
C) infrastructural investment will grow.
D) consumer confidence will rise.
E) more resources are directed toward payment of interest.

Question 79

From comparisons of income distribution studies over time,it generally appears that

A) income is more evenly distributed in the richer nations.
B) there are few variations in income distribution among developed and developing nations.
C) comparisons over time demonstrate that income redistribution changes relatively quickly, so older data have limited value.
D) the middle quintiles in most nations are growing at the expense of the bottom 20 percent.
E) income inequality decreases in the early stages of development and reverses in the later stages.

Question 80

According to the text,relative changes in wage rates among nations may cause the multinational firm to

A) choose new exchange rates.
B) reduce the number of workers.
C) change its sources of supply from one country to another.
D) install labor-saving machinery.
E) eliminate product lines.