Question 1

Economic conditions of countries are indicators of whether future investment or disinvestment by a firm will be appropriate.

Accepted Answer

Factors such as economic growth rates, market trends, and the economic policy of governments are likely to affect the profitability and performance of existing operations and whether or not future investment or divestment is required

Question 2

The ability to fine-slice elements of the value chain and relocate them across national borders to where they can be performed the best will generate greatest value to the host country firm

Accepted Answer

Fine-slice elements of the value chain will generate the greatest value to the lead firm

Question 3

Risk from an economic perspective, is the potential that the return achieved from a business endeavour is not that which was expected

Accepted Answer

Includes financial risk, operational risk, and certain aspects of political risk

Question 4

All country-level macroeconomic statistics and indicators are to be taken at face value as the basis for taking commercial decisions because national economic data is reliable

Accepted Answer

All economic variables are only estimates, and macroeconomic statistics and indicators in particular require careful and cautious interpretation when used as the basis for commercial decisions

Question 5

Business conditions of a country are shaped, to a great extent, by the nature of its prevailing economic system

Accepted Answer

The economic system influences how much freedom businesses have to operate as they wish.

Question 6

A command economy is an economic system in which the production and investment decisions in a country are set by the interplay of demand and supply in a way that signals to producers what to produce and to consumers what to purchase

Accepted Answer

In a command economy decisions in a country are formulated in a top-down manner by a state authority - usually a government or government agency

Question 7

Members of the European Union reflect examples of free market economies.

Accepted Answer

They reflect examples of mixed economies.

Question 8

Command economies are regarded as stimulating innovation and entrepreneurship

Accepted Answer

Command economies are regarded as inhibiting innovation and entrepreneurship

Question 9

Economic freedom generally has the effect of reducing transaction costs and ameliorating some of the liability of foreignness

Accepted Answer

Transparency and confidence in the operating environment is higher in a freer society, reducing the perceived and actual risks

Question 10

A country's economic size provides a strong indication as to the scale of business opportunities offered by a country

Accepted Answer

It is an indication of the absolute value of final markets and the total demand for goods and services relative to other countries

Question 11

Economic factors when used as the basis for taking commercial decisions in combination determine Please select all that apply.

Accepted Answer

The overall attractiveness of a foreign country as a sales, production or investment location determine opportunities, costs and risks associated with doing business in a foreign location

Question 12

The main features of a planned economy are: Please select all that apply.

Accepted Answer

Planned economies are in its entirety or to a large degree controlled by the state and the use of resources are planned by the state.

Question 13

Inflationary pressures in general have an adverse effect on: Please select all that apply.

Accepted Answer

Inflation is an indicator of national economic well-being.

Question 14

Various types of labour-related cost that exert a strong effect on the location decisions of global factories are: Please select all that apply.

Accepted Answer

Labour-related costs constitute a large portion of total operational costs for a firm and differential labour costs can exert a strong effect on location decisions.

Question 15

The balance of payments is _______ (select all that applies)

Accepted Answer

The balance of payments is a statement of a country's trade and financial transactions with the rest of the world in a given period-usually, a year. Comparative data on a country's balance of payments represent another general indicator of economic well-being, especially in relation to other countries. There are two components to a country's reported balance of payments: the current account; and the capital account.

Question 16

Potential impact of inflation on global factory firms is:

Accepted Answer

Unless incomes rise commensurately consumers spend less as prices of goods and services increase

Question 17

Gross national income (GNI) is…

Accepted Answer

The value of all domestic production (foreign and locally owned), plus income (e.g. interest and dividends) from the international production activities of national companies abroad (in a given year); a preferred measure of the World Bank

Question 18

Changes in the value of a currency when normalising for changes in the domestic price level is referred to as the:

Accepted Answer

Use of some deflator to account for price inflation reflects the real exchange rate

Question 19

When a government or central bank determines the value at which a national currency is linked to one or more reference currencies for an extended period of time, is know as:

Accepted Answer

A policy by a government or central bank to reflect stability with respect to the foreign exchange market

Question 20

Where a group of countries share a common but distinct currency is know as:

Accepted Answer

It is often associated with a trade bloc and involves a regional central bank, i.e. the euro

Quiz 8: The Economic Dimension