Question 1

The "balance of payments" is a record of all economic transactions between the residents of a country and the rest of the world.It is divided into the current and capital accounts.Current accounts include all of the following except:
A)balance on goods.
B)portfolio investments.
C)balance on services.
D)goods imports.
E)goods exports.

Accepted Answer

Portfolio investments are recorded in the capital account, not the current account. The current account includes transactions like the balance on goods and services, goods imports, and goods exports.

Question 2

The fastest-growing sector of world trade includes:
A)travel and entertainment.
B)accounting and legal services.
C)royalties and license fees.
D)engineering services.
E)all of the above

Accepted Answer

All the options listed (travel and entertainment, accounting and legal services, royalties and license fees, and engineering services) are part of the services sector, which is the fastest-growing sector in world trade. This sector includes a wide range of services that are increasingly being traded internationally, thanks to advancements in technology and globalization.

Question 3

The United States' growing trade deficit reflects a number of factors which exclude:
A)increased imports from China.
B)a seemingly insatiable consumer demand for imported goods.
C)the enormous cost of military operations in the Middle East.
D)the services trade surplus.
E)record goods sales to developing countries.

Accepted Answer

The services trade surplus, which includes things like financial services and tourism, has helped offset the trade deficit from goods. Therefore, D is the exclusion. A, B, C, and E are all factors that have contributed to the growing trade deficit.

Question 4

When the world's leaders meet to discuss policy issues, non-governmental organizations (NGOs):
A)are included in meetings.
B)often take advantage of the opportunity to make their voices heard.
C)sign final documents.
D)provide educational materials.
E)are excluded from meetings.

Accepted Answer

NGOs often hold protests and use other methods to make their voices heard during international meetings of world leaders. However, they are not typically included in the actual meetings or involved in the formal decision-making process.

Question 5

When countries or regions experience currency and/or economic stress, all of the following events can take place except:
A)increased exposure to certain risks.
B)new profit opportunities.
C)lower local currency financing costs.
D)bad debts occur.
E)cancellation of aircraft equipment sales.

Accepted Answer

When countries or regions experience currency and/or economic stress, local currency financing costs tend to rise, not lower. Therefore, option C is not a possible event that can take place.

Question 6

One Friday a few years ago, the Big Mac Index suggested that the yen was overvalued relative to the dollar by 70%.When currency markets opened on the following Monday, anyone using the Big Mac Index would conclude that yen was only 20% overvalued relative to the dollar.What is the most likely explanation for this?
A)Japan's Central Bank acted to prop up the yen.
B)Inflation in Japan suddenly spiked upward.
C)McDonald's headquarters stopped hedging.
D)McDonald's Japan reduced the yen price of a Big Mac.
E)McDonald's Japan increased the yen price of a Big Mac.

Accepted Answer

The most likely explanation for the change in the Big Mac Index is that McDonald's Japan reduced the yen price of a Big Mac, making it relatively cheaper compared to the price of a Big Mac in the United States. This would lead to a decrease in the index value, suggesting that the yen was less overvalued compared to the U.S. dollar.

Question 7

Between the year 2001 and 2006, China bought more than $250 billion in U.S.Treasury bonds.Such purchases:
A)ensures that China's currency is relatively weak compared to the U.S.dollar.
B)indicate that China is not sure of its economic viability.
C)show that the currency exchange rate is unpredictable.
D)predict that yuan will be devalued in the near future.
E)indicate that China's currency is stronger than the U.S.dollar.

Accepted Answer

By buying U.S. Treasury bonds, China increases its holdings of U.S. dollars, which in turn strengthens the dollar and makes the Chinese yuan weaker in comparison. This helps China's export-oriented economy by making its goods more affordable and attractive in foreign markets.

Question 8

Porsche relies on currency hedging rather than price increases in order to:
A)boost pretax profits on sales of its automobiles.
B)balance the relative value of the dollar compared to the euro.
C)protect all earnings from foreign-exchange movements.
D)generate about 45% of its sales in the United States.
E)A, B & C

Accepted Answer

Porsche relies on currency hedging to balance the relative value of the dollar compared to the euro, protect all earnings from foreign-exchange movements, and boost pretax profits on sales of its automobiles. This strategy allows Porsche to avoid increasing the prices of its automobiles and maintain its competitive position in the market while managing currency risks. Therefore, the correct answer is E, as all options A, B, and C are valid reasons for Porsche to use currency hedging.

Question 9

If an American tourist in Tokyo pays more in dollars for the same amount of yen that she bought last week, then:
A)a Japanese tourist in San Francisco pays more in yen for the same amount of dollars that she bought the week before.
B)the dollar has depreciated relative to the yen.
C)the yen has depreciated relative to the dollar.
D)the dollar has appreciated relative to the yen.
E)the dollar and yen both remained same in value.

Accepted Answer

If the American tourist is paying more in dollars for the same amount of yen, it means that the value of the dollar has decreased in relation to the yen. Therefore, when the Japanese tourist buys dollars in San Francisco, they will have to pay more yen for the same amount of dollars compared to the previous week. So, option B is the correct answer.

Question 10

Product and market opportunities in a postindustrial society are more heavily dependent upon new products and innovations than in industrial societies.An example of this would be:
A)Nestlé marketing Bono brand cookies in Brazil.
B)Coca-Cola company developing a beverage Vintago in low-income countries.
C)New e-commerce markets for interactive forms of electronic communication.
D)Hermes creating handbags called Amazonia.
E)India's Suzlon Energy using wind-driven turbines.

Accepted Answer

The emergence of e-commerce markets for interactive forms of electronic communication is a clear example of a product and market opportunity that heavily relies on innovation in a postindustrial society. With the widespread adoption of the internet and mobile devices, e-commerce has become a significant avenue for businesses to reach and engage with consumers. This has given rise to the development of new products and services specifically designed for online platforms, such as digital marketplaces and social media advertising.

Question 11

Recently, the Organization for Economic Cooperation and Development (OECD)has become more focused on global issues as seen by:
A)addressing the vexing problem of bribery.
B)requiring members to cooperate when pursuing bribery allegations.
C)helping members candidly assess their own economic policies.
D)member nations working together in committees to review social policies.
E)all of the above

Accepted Answer

All options listed are examples of the OECD taking a more global focus. The organization's efforts to address bribery, require member cooperation, assess economic policies, and review social policies are all indications of a broader, more international scope.

Question 12

Measuring elevator populations in countries measured as units installed per thousand people gives an estimate of the market for elevators.That China has about one half an elevator per thousand people is indicative of:
A)low product saturation level.
B)high product saturation level.
C)high population level.
D)high technological level.
E)low technological level.

Accepted Answer

Having one half an elevator per thousand people suggests a low product saturation level, meaning there is significant room for growth in the elevator market in China. It does not necessarily indicate anything about population or technological level.

Question 13

Which country is the only country classified as an emerging market among the high-income countries by influential stock market indexes?
A)United States
B)South Korea
C)Britain
D)Italy
E)Malaysia

Accepted Answer

South Korea is the only country classified as an emerging market among the high-income countries by influential stock market indexes such as MSCI and FTSE.

Question 14

To the extent that a country sells more goods and services abroad than it buys, there will be:
A)a greater demand for its currency.
B)a surplus production of goods and services.
C)a scarcity of goods and services within the country.
D)a need for revaluation of its currency.
E)time for fluctuating its currency.

Accepted Answer

When a country has a trade surplus, it means that it is exporting more than it is importing. This creates a greater demand for its currency as foreign entities need to buy the country's currency to purchase its goods and services. As a result, the value of the country's currency may strengthen.

Question 15

The term "Expanded Triad" includes all of the following countries or regions except:
A)Japan
B)United States
C)Canada
D)Mexico
E)Russia

Accepted Answer

The Expanded Triad consists of Japan, the United States, Canada, and Mexico, but not Russia.

Question 16

The Organization for Economic Cooperation and Development (OECD)is comprised of:
A)the 30 high-income countries.
B)countries that believe in market-allocation economic systems.
C)pluralistic democracies.
D)countries that demonstrate progress toward economic reform.
E)All of the above statements are applicable.

Accepted Answer

The OECD is an organization of countries that are generally high-income, believe in market-based economic systems, are pluralistic democracies, and demonstrate progress toward economic reform.

Question 17

The Big Mac Index shows that the price of Big Mac in China converted from the local currency, yuan, to be $2.18, whereas its price in the United States is $3.73.This shows that:
A)the Big Mac is more popular in China than in the United States.
B)the Big Mac is less expensive in the United States than in China.
C)the Chinese yuan is overvalued when compared to US $.
D)the Chinese yuan is undervalued against the US $.
E)beef is less expensive in China than in the United States.

Accepted Answer

The Big Mac Index compares the price of a Big Mac in different countries to assess the relative value of currencies. The fact that the price of a Big Mac is lower in China when converted to US dollars suggests that the Chinese yuan is undervalued against the US dollar.

Question 18

Which two companies are sourcing product components from small-scale enterprises, which in turn are helping preserve old-growth forests as well as economic opportunities in Brazil?
A)Ford Motor Company and Armani
B)DaimlerAG and Hermes
C)General Motors and Hugo Boss
D)Volkswagen and Coach
E)Coca-Cola and Nestlé

Accepted Answer

The answer of Which two companies are sourcing product components...

Question 19

Which of the following is true about the Triad?
A)Triad countries account for approximately one-third of world income and one- third of world population.
B)Triad countries account for approximately 75% of world income as measured by GNP.
C)Triad countries are those in which consumer products, industrial products, and the services sector each contribute one-third to GDP.
D)Triad countries account for approximately 25% of world income as measured by GNP.
E)Triad countries account for approximately 50% of world income as measured by the World Bank.

Accepted Answer

The Triad refers to the three major economic regions of the world: North America, Europe, and Asia-Pacific. These three regions account for approximately 75% of world income as measured by GNP. Therefore, option B is the correct answer. Option A is incorrect as it underestimates the economic importance of the Triad. Option C is incorrect as it is not a widely accepted definition of the Triad. Option D is incorrect as it significantly underestimates the economic importance of the Triad. Option E is also incorrect as the World Bank does not specifically measure income by Triad countries.

Question 20

Devaluation can result from government action or an economic crisis.In August 1998, the Russian economy imploded.As a result all of the following listed events happened except:
A)the ruble plunged in value.
B)the government defaulted on on its foreign debt obligation.
C)many Russians faced wage cuts and layoffs.
D)Russia's economy did not recover from the impact.
E)savings were wiped out as banks collapsed.

Accepted Answer

The question states that Russia's economy "imploded" in August 1998 as a result of an economic crisis. Therefore, it can be assumed that the economy did not recover from the impact. Therefore, all of the other events listed (A, B, C, and E) are true, but not (D).

Quiz 2: The Global Economic Environment

The "balance of payments" is a record of all economic transactions between the residents of a country and the rest of the world.It is divided into the current and capital accounts.Current accounts include all of the following except:

The fastest-growing sector of world trade includes:

The United States' growing trade deficit reflects a number of factors which exclude:

When the world's leaders meet to discuss policy issues, non-governmental organizations (NGOs) :

When countries or regions experience currency and/or economic stress, all of the following events can take place except:

Between the year 2001 and 2006, China bought more than $250 billion in U.S.Treasury bonds.Such purchases:

Porsche relies on currency hedging rather than price increases in order to:

If an American tourist in Tokyo pays more in dollars for the same amount of yen that she bought last week, then:

Product and market opportunities in a postindustrial society are more heavily dependent upon new products and innovations than in industrial societies.An example of this would be:

Recently, the Organization for Economic Cooperation and Development (OECD) has become more focused on global issues as seen by:

Measuring elevator populations in countries measured as units installed per thousand people gives an estimate of the market for elevators.That China has about one half an elevator per thousand people is indicative of:

Which country is the only country classified as an emerging market among the high-income countries by influential stock market indexes?

To the extent that a country sells more goods and services abroad than it buys, there will be:

The term "Expanded Triad" includes all of the following countries or regions except:

The Organization for Economic Cooperation and Development (OECD) is comprised of:

The Big Mac Index shows that the price of Big Mac in China converted from the local currency, yuan, to be $2.18, whereas its price in the United States is $3.73.This shows that:

Which two companies are sourcing product components from small-scale enterprises, which in turn are helping preserve old-growth forests as well as economic opportunities in Brazil?

Which of the following is true about the Triad?

Devaluation can result from government action or an economic crisis.In August 1998, the Russian economy imploded.As a result all of the following listed events happened except: