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practice questions Flashcards

1
Q

The _____ is the rate at which one currency is converted into another.
A. LIBOR
B. reference rate
C. exchange rate
D. par value

A

C. exchange rate

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2
Q

Assume that the currency of Country A falls sharply in value against the currency of Country B. Which of the following will be a consequence of this exchange rate movement?

A. Country B’s products will become more competitive.
B. Country A’s exports to Country B will increase.
C. Country B’s products will become less expensive in Country A.
D. There will be no difference in the volume or direction of trade.

A

B. Country A’s exports to Country B will increase.

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3
Q

_____ refers to adverse consequences of unpredictable changes in exchange rates.
A. Systemic risk
B. Foreign exchange risk
C. Portfolio risk
D. Liquidity risk

A

B. Foreign exchange risk

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4
Q

_____ typically involves the short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates.
A. Venture capital
B. Hedging
C. Currency speculation
D. Exchange rate manipulation

A

C. Currency speculation

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5
Q

Robben Inc. converted 1 million dollars into euros when the exchange rate was $1= €0.75. The company converts this back into dollars after three months when the exchange rate is $1 = €0.80. Which of the following is true of the outcome of this transaction?

A. Loss of $62,500
B. Loss of $66,667
C. Gain of $50,000
D. Gain of $62,500

A

A. Loss of $62,500

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6
Q

When a firm insures itself against foreign exchange risk, we say that it is engaging in:
A. speculating.
B. timing the market.
C. hedging.
D. market making.

A

C. hedging.

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7
Q

When two parties agree to exchange currency and execute the deal immediately, the transaction is referred to as a(n):
A. futures transaction.
B. call option exercise.
C. arbitrage transaction.
D. spot exchange

A

D. spot exchange

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8
Q

A _____ occurs when two parties agree to exchange currency and execute the deal at some specific date in the future.
A. forward exchange
B. spot exchange
C. carry trade
D. contrarian trade

A

A. forward exchange

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9
Q

Which of the following refers to the purchase of securities in one market for immediate resale in another to profit from a price discrepancy?
A. Exercise
B. Straddle
C. Arbitrage
D. Swap

A

C. Arbitrage

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10
Q

Which of the following occurs when the quantity of money in circulation rises faster than the stock of goods and services?
A. Liquidity crunch
B. Deflation
C. Trade surplus
D. Inflation

A

D. Inflation

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11
Q

When the foreign exchange market determines the relative value of a currency, the country is said to adhere to a _____ exchange rate regime.
A. fixed
B. floating
C. dirty float
D. pegged

A

B. floating

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12
Q

When the value of a currency is fixed relative to a reference currency, this is referred to as a:
A. variable exchange rate.
B. pegged exchange rate.
C. linked exchange rate.
D. floating exchange rate.

A

B. pegged exchange rate.

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13
Q

Some countries try to hold the value of their currency within some range against an important reference currency. This is referred to as a:
A. dirty float.
B. free float.
C. pegged float.
D. variable alternative.

A

A. dirty float.

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14
Q

The Bretton Woods conference of 1944 established the basic framework for the:
A. WTO.
B. post-World War II monetary system.
C. Global Agreement on Tariffs and Trade.
D. floating exchange rate system

A

B. post-World War II monetary system.

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15
Q

Which of the following was a major international institution created by the Bretton Woods conference?
A. Global Agreement on Tariffs and Trade
B. European monetary system
C. World Trade Organization
D. World Bank

A

D. World Bank

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16
Q

Which of the following is an accurate description of the gold standard?
A. Pegging currencies to gold and guaranteeing convertibility.
B. Conducting international trade by physically exchanging gold.
C. The most valuable currency in the world at any given point in time.
D. Trading gold for other valuable commodities

A

A. Pegging currencies to gold and guaranteeing convertibility.

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17
Q

In the early 1970s, the ______ became the currency for oil trades.
A. British pound
B. German mark
C. U.S. dollar
D. Saudi dinar

A

C. U.S. dollar

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18
Q

Which of the following is an exchange rate system under which a country’s exchange rate is allowed to fluctuate against other currencies within a target zone?
A. Free float
B. Fixed peg
C. Adjustable peg
D. Currency board

A

C. Adjustable peg

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19
Q

According to the Bretton Woods agreement of 1944, which currency remained convertible to gold?
A. U.S. dollar
B. British pound
C. Japanese yen
D. German mark

A

A. U.S. dollar

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20
Q

Which of the following was the objective of establishing the World Bank?
A. Become the lender of last resort to reserve banks.
B. Promote general economic development.
C. Maintain stability in the international monetary system.
D. Regulate exchange rates of member nations.

A

B. Promote general economic development.

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21
Q

The _____ of a firm is measured by the difference between value and cost.
A. customer surplus
B. value creation
C. cost curve
D. value efficiency

A

B. value creation

22
Q

One of the ways in which the _____ function in a firm can create value is by discovering consumer needs and communicating them back to the R&D function of the company, which can then design products that better match those needs.
A. production
B. marketing and sales
C. human resources
D. logistics

A

B. marketing and sales

23
Q

This function can create a perception of superior value in the minds of consumers by solving customer problems and supporting customers after they have purchased the product.
A. Production
B. Marketing and sales
C. Human resources
D. Customer service

A

D. Customer service

24
Q

The _____ function controls the transmission of physical materials through the value chain, from procurement through production and into distribution.
A. human resource
B. finance
C. marketing
D. logistics

A

D. logistics

25
Q

The _____ function ensures that the company has the right mix of skilled people to perform its value creation activities effectively and it also ensures that people are adequately trained, motivated, and compensated to perform their value creation tasks.
A. finance
B. marketing
C. human resource
D. logistics

A

C. human resource

26
Q

Devices used to reward appropriate managerial behavior are called _____.
A. loyalties
B. reports
C. processes
D. incentives

A

D. incentives

27
Q

The norms and value systems that are shared among the employees of an organization refer to its _____.
A. process scenario
B. organizational structure
C. business structure
D. organizational culture

A

D. organizational culture

28
Q

Skills within the firm that competitors cannot easily match or imitate are referred to as _____.
A. core competencies
B. barriers to entry
C. internalities
D. externalities

A

A. core competencies

29
Q

Which of the following is an important caveat that is likely to discourage global expansion?
A. Economies of scale
B. Cost of production
C. Trade barriers
D. Mass customization

A

C. Trade barriers

30
Q

Firms that pursue a(n) _____ strategy try to create value by transferring valuable skills and products to foreign markets where indigenous competitors lack those skills and products.
A. nationalization
B. transnational
C. global
D. international

A

D. international

31
Q

The advantages frequently associated with entering a market early are commonly known as:
A. inaugural advantages.
B. first-mover advantages.
C. initial-entrant premiums.
D. proactive-mover benefits.

A

B. first-mover advantages.

32
Q

Which of the following is an advantage of exporting?
A. The firm may realize substantial scale economies from its global sales volume.
B. It allows firms to successfully use localization strategy.
C. The firm is insulated from volatility in foreign exchange rates.
D. The firm is insulated from the threat posed by high tariff rates.

A

A. The firm may realize substantial scale economies from its global sales volume.

33
Q

Which of the following is a disadvantage of exporting?
A. The firm incurs the costs of establishing manufacturing operations in the host country.
B. It does not give a firm any control over manufacturing, marketing, and strategy.
C. High transport costs can make exporting uneconomical.
D. The firm cannot use countertrading options such as offsets.

A

C. High transport costs can make exporting uneconomical.

34
Q

Which of the following modes of entry into foreign markets can be rendered uneconomical by high
tariff barriers?
A. Turnkey contract
B. Licensing
C. Exporting
D. Joint venture

A

C. Exporting

35
Q

A project in which a firm agrees to set-up an operating plant for a foreign client and hand over the plant when it is fully operational is referred to as a:
A. merger.
B. turnkey project.
C. franchising project.
D. joint venture.

A

B. turnkey project.

36
Q

A licensor receives _____ in return for granting the rights to intangible property to the licensee for a specified period.
A. intellectual property
B. interest
C. a fixed fee
D. a royalty fee

A

D. a royalty fee

37
Q

To overcome quality control problems in franchises, a company could set-up _____ in each country in which the firm expands.
A. rival competition
B. a subsidiary
C. a cost-control center
D. a licensee

A

B. a subsidiary

38
Q

A _____ entails establishing a firm that is owned by two or more otherwise independent firms.
A. licensing agreement
B. wholly owned subsidiary
C. franchise
D. joint venture

A

D. joint venture

39
Q

Which of the following is an advantage of joint ventures?
A. Firms benefit from a local partner’s knowledge of the host country.
B. It enables firms to keep a tight control over its technology.
C. Friction and conflict between partners are nonexistent.
D. It gives firms tight control over subsidiaries.

A

A. Firms benefit from a local partner’s knowledge of the host country.

40
Q

In an international businesses where transferring products, competencies, skills, and know-how from the established operations of the firm to the new subsidiary are principal ways of creating value, a(n) _____ is a better choice since it is much easier to build an organization culture and operating routines from scratch than it is to change the same of an existing unit.
A. joint venture
B. greenfield investment
C. merger
D. acquisition

A

B. greenfield investment

41
Q

By expanding the size of the market, exporting can enable a firm to achieve _____, thereby lowering its unit costs.
A. economies of scale
B. returns to scale
C. diseconomies of scale
D. network externalities

A

A. economies of scale

42
Q

Great trading houses in Japan are called:
A. kaizen.
B. sogo shosha.
C. MITI.
D. guanxi.

A

B. sogo shosha.

43
Q

For U.S. firms, the most comprehensive source of export opportunities information is the:
A. Small Business Administration.
B. U.S. Department of Commerce.
C. Federal Trade Commission.
D. Federal Bank.

A

B. U.S. Department of Commerce.

44
Q

The International Trade Administration and the United States and Foreign Commercial Service are both:
A. private organizations that assist U.S. exporters.
B. great trading houses of the U.S.
C. organizations within the U.S. Department of Commerce.
D. departments in Small Business Administration

A

C. organizations within the U.S. Department of Commerce.

45
Q

When an exporter ships goods to the bank which issued a letter of credit, it gives the bank title to the goods in the form of a:
A. merchandise bill.
B. bill of lading.
C. bill of exchange.
D. draft.

A

B. bill of lading.

46
Q

Which of the following stands at the center of international commercial transactions?
A. Bill of lading
B. Time draft
C. Letter of credit
D. Sight draft

A

C. Letter of credit

47
Q

The letter of credit is issued by a bank at the request of a(n):
A. exporter.
B. government.
C. importer.
D. shipping company.

A

C. importer.

48
Q

The letter of credit:
A. states that the bank will pay a specified sum of money to a beneficiary on presentation of particular, specified documents.
B. is an order written by an exporter instructing an importer to pay a specified amount of money at a specified time.
C. serves as a receipt, a contract, and a document of title.
D. indicates that the carrier has received the merchandise described on the face of the document.

A

A. states that the bank will pay a specified sum of money to a beneficiary on presentation of particular, specified documents.

49
Q

Which of the following is an advantage of the letter of credit system to the exporter?
A. Payment for merchandise only after delivery is made
B. Facilitates obtaining of preexport financing
C. Higher price is obtained for goods
D. Lower shipping costs are incurred

A

B. Facilitates obtaining of preexport financing

50
Q

The _____ guarantees repayment of medium and long-term loans U.S. commercial banks make to foreign borrowers for purchasing U.S. exports.
A. United Nations
B. Central Bank
C. World Bank
D. Ex-Im Bank

A

D. Ex-Im Bank

global business (2 decks)

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