Final Exam (Part 2)

Question 1

Which of the following terms refers to the broadest measure of economic development of a country?

Answer 1

C. gross national product (GNP)

Question 2

Which of the following measures the extent to which a government equitably provides its people with a long and healthy life, an education, and a decent standard of living?

Answer 2

B. human development index

Question 3

Nations having the poorest infrastructures and lowest personal incomes are called ________.

Answer 3

B. developing countries

Question 4

A country that has recently increased the portion of its national production and exports derived from industrial operations is called a(n) ________.

Answer 4

C. newly industrialized country (NIC)

Question 5

________ is the value of all goods and services produced by the domestic economy over a one-year period.

Answer 5

D. Gross domestic product (GDP)

Question 6

________ is the process by which a nation changes its fundamental economic organization and creates new free-market institutions.

Answer 6

A. Economic transition

Question 7

Which of the following terms refers to the forced transfer of assets from a company to the government without compensation?

Answer 7

A. confiscation

Question 8

________ is the forced transfer of assets from a company to the government with compensation.

Answer 8

B. Expropriation

Question 9

Which of the following is a disadvantage of local requirement laws to foreign companies?

Answer 9

D. Companies required to hire local personnel might be forced to take on inadequately trained workers.

Question 10

Global Trading just learned that the government of one country in which it does business has taken over the entire electric utility industry. The government’s actions are an example of ________.

Answer 10

C. nationalization

Question 11

________ is the chance that political forces may change a country’s business environment in ways that lead investors to lose some or all of the value of their investment or be forced to accept a lower-than-projected rate of return.

Answer 11

D. Political risk

Question 12

The relative ability of two countries’ currencies to buy the same basket of goods in those two countries is called ________.

Answer 12

A. purchasing power parity

Question 13

Scenario: Cleanshot USA in Russia
When Cleanshot USA, a photography products company, decided to enter the international arena, it chose Russia as its main market. Although Russia has been in transition for years, Cleanshot managers believe their company has tremendous opportunities there.

Which of the following challenges is Cleanshot most likely to face in Russia?

Answer 13

D. organized crime

Question 14

Scenario: Cleanshot USA in Russia
When Cleanshot USA, a photography products company, decided to enter the international arena, it chose Russia as its main market. Although Russia has been in transition for years, Cleanshot managers believe their company has tremendous opportunities there.

Given the lack of available hard currency, Russian businesses often use goods and services as payment for other products they buy from abroad. This practice is referred to as ________.

Answer 14

D. barter

Question 15

________ refers to the purchase, sale, or exchange of goods and services across national borders.

Answer 15

A. International trade

Question 16

The danger of trade dependency is that ________.

Answer 16

A. political turmoils in a country might affect all dependent countries

Question 17

________ says that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports.

Answer 17

A. Mercantilism

Question 18

The condition that results when the value of a nation’s exports is greater than the value of its imports is called ________.

Answer 18

A. a trade surplus

Question 19

The condition that results when the value of a country’s imports is greater than the value of its exports is called ________.

Answer 19

C. a trade deficit

Question 20

Which of the following refers to the ability of a nation to produce a good more efficiently than any other nation?

Answer 20

B. absolute advantage

Question 21

To complete his business bookkeeping work each month, a business owner spends about 20 hours and in the process, has to give up $900 in income. If he hired a bookkeeper to do the work, the job would be completed in 15 hours and would cost him $600. Should the owner hire the bookkeeper or continue to do the work himself?

Answer 21

C. He should hire the bookkeeper because the bookkeeper has an absolute advantage in completing the books.

Question 22

According to the theory of ________, trade is beneficial even if one country is less efficient in the production of two goods, as long as it is less inefficient in the production of one of the goods.

Answer 22

C. comparative advantage

Question 23

The ________ theory states that countries produce and export goods that require resources available in abundance and import goods that require resources in short supply.

Answer 23

D. factor proportions

Question 24

The Leontief paradox describes evidence ________.

Answer 24

D. contrary to the predictions of the factor proportions theory

Question 25

The ________ theory states that a country’s export eventually becomes its import.

Answer 25

B. international product life cycle

Question 26

Which of the following is an argument offered by the new trade theory?

Answer 26

D. There are gains to be made from specialization and increasing economies of scale.

Question 27

Which element of national competitive advantage theory divides resources into two groups: basic and advanced?

Answer 27

D. factor conditions

Question 28

The pattern of imports and exports that occurs in the absence of trade barriers is called ________.

Answer 28

D. free trade

Question 29

Which of the following best describes the infant industry argument?

Answer 29

A. It states that a country’s emerging industries need protection from international competition during their development until they become sufficiently competitive.

Question 30

Which of the following is an instrument that governments use to promote trade?

Answer 30

A. export financing

Question 31

Financial assistance given to domestic producers in the form of cash payments is an example of a(n) ________.

Answer 31

D. subsidy

Question 32

Which of the following is a method of restricting trade?

Answer 32

B. local content requirements

Question 33

Which of the following will add to the cost of an imported product by levying an additional tax upon it?

Answer 33

C. tariffs

Question 34

A tariff levied by the government of a country that a product is passing through on its way to a final destination is called a ________ tariff.

Answer 34

D. transit

Question 35

Which of the following is true of quotas?

Answer 35

D. They help domestic producers maintain their market shares and prices.

Question 36

Which of the following statements is true of embargoes?

Answer 36

A. An embargo may be placed on one or a few goods or may completely ban trade in all goods.

Question 37

Purposely understaffing customs offices to cause time delays, requiring special licenses that take a long time to obtain, and requiring air carriers to land at inconvenient airports are all examples of ________.

Answer 37

A. administrative delays

Question 38

Scenario: Konesia Joins the World
Konesia, a former totalitarian economy and pariah state, is taking steps toward a free market economy. The government wants to encourage trade but also wants to find a balance so that local businesses and industries are not harmed.

Which of the following would be Konesia’s least appropriate method to restrict unwanted trade?

Answer 38

A. reduce tariffs

Question 39

Scenario: Konesia Joins the World
Konesia, a former totalitarian economy and pariah state, is taking steps toward a free market economy. The government wants to encourage trade but also wants to find a balance so that local businesses and industries are not harmed.

If Konesia chooses to levy tariffs as a percentage of the stated price of an imported product, this would be an example of a(n) ________.

Answer 39

C. ad valorem tariff

Question 40

Scenario: Konesia Joins the World
Konesia, a former totalitarian economy and pariah state, is taking steps toward a free market economy. The government wants to encourage trade but also wants to find a balance so that local businesses and industries are not harmed.

Which of the following is the most likely reason for Konesia’s government to impose an import quota?

Answer 40

B. to maintain market shares and prices of domestic producers

Question 41

Scenario: Konesia Joins the World
Konesia, a former totalitarian economy and pariah state, is taking steps toward a free market economy. The government wants to encourage trade but also wants to find a balance so that local businesses and industries are not harmed.

Konesia has created a hybrid form of trade restriction-a lower tariff rate for a certain quantity of imports and a higher rate for quantities that exceed the quota. This is an example of a(n) ________.

Answer 41

A. tariff-quota