international business, 14e (daniels, et al) - chapter 04

7/24/2019 International Business, 14e (Daniels, et al) - Chapter 04

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International Business, 14e (Daniels et al.)

Chapter 4 The Economic Environments Facing Businesses

1) The recent global economic crisis has led to which of the following?A) governments seeking to impose more constraints on capitalismB) governments seeking to eliminate constraints on capitalism

C) governments seeking to increase the interdependence of developing economiesD) governments seeking to eliminate the interdependence of developing economiesAnswer: ADiff: 2earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept!b$ective: 1AAC#B: D%namics of the global econom%

2) &hich of the following is most likel% a tr"e statement abo"t the global econom% since the 1'(s?

A) #ocialist governments are intervening more in global e*changes+B) &ealth% co"ntries are e*ercising total control over emerging markets+C) Developing co"ntries are losing growing shares of their foreign,e*change reserves+D) -merging economies are adopting the principles and practices of free markets+Answer: DDiff: .earning !"tcome: Disc"ss trends in and the debate over globali/ation#kill: Concept!b$ective: .AAC#B: D%namics of the global econom%

.) 0%le an international manager for Ape* nd"stries has been given the task of anal%/ing theeconomies of three different emerging co"ntries for the firm3s potential e*pansion+ &hich of thefollowing 4"estions is -A#T relevant to 0%le3s assignment?A) 5ow m"ch freedom will Ape* have to r"n its foreign operations?B) &hat are the c"rrent economic policies related to development?C) &hat is the likelihood that Ape* can fill man"fact"ring positions with locals?D) &hat factors in the co"ntr% drive or hinder economic change?Answer: CDiff: .earning !"tcome: Describe how differences in political econom% infl"ence economic development#kill: Application

!b$ective: 1AAC#B: D%namics of the global econom%

1



6) 7anagers at 7orrison 7an"fact"ring are considering e*panding the firm3s prod"ction overseas andwant to ens"re that the firm is located in a co"ntr% with a high degree of economic freedom+ 8resentl%which of the following locations wo"ld most likel% offer 7orrison the highest economic freedom?A) 7e*icoB) 5ong 0ongC) 9ene/"elaD) orth 0orea

Answer: BDiff: 2#kill: Application!b$ective: 2AAC#B: D%namics of the global econom%

;) #ince the late 1'(s the growing emergence of freer markets has been powered b% the reali/ation that <<<<<<<<+A) economic growth is directl% related to economic freedomB) economic growth has a limited effect on the standard of livingC) adoption of free market principles contrib"tes to social in$"stices

D) centrall% planned economies are best designed to deliver progressAnswer: ADiff: 2earning !"tcome: Describe how differences in political econom% infl"ence economic development#kill: Application!b$ective: 2AAC#B: D%namics of the global econom%

=) The -conomic >reedom nde* indicates that economic freedom is positivel% correlated with all of thefollowing -C-8T <<<<<<<<+A) life e*pectanc%

B) literac%C) environmental s"stainabilit%D) diversit%Answer: DDiff: 2#kill: Concept!b$ective: 2

@) The recent global credit crisis has interr"pted the trend of national economies <<<<<<<<+A) rapidl% adopting the command market modelB) steadil% adopting the free market model

C) moving from the mi*ed to the command modelD) t"rning awa% from the mi*ed modelAnswer: BDiff: 2earning !"tcome: Disc"ss trends in and the debate over globali/ation#kill: Concept!b$ective: 2AAC#B: D%namics of the global econom%

2



() 5istor% s"ggests that if the economic crisis worsens we are likel% to see more people 4"estion the <<<<<<<<+A) fall of comm"nismB) legitimac% of capitalismC) practicalit% of mi*ed market economiesD) correlation between economic freedom and prosperit%Answer: B

Diff: 2earning !"tcome: Describe how differences in political econom% infl"ence economic development#kill: Concept!b$ective: 2AAC#B: D%namics of the global econom%

') According to research which of the following co"ntries is the strongest s"pporter of free markets?A) ChinaB) ndiaC) >ranceD) kraine

Answer: ADiff: 2earning !"tcome: Describe how differences in political econom% infl"ence economic development#kill: Concept!b$ective: 2AAC#B: D%namics of the global econom%

1) &hich of the following is !T a characteristic of capitalism?A) private ownership of assetsB) right to profit from individ"al effortC) state control of factors of prod"ction

D) private control of investmentAnswer: CDiff: 2earning !"tcome: Describe how differences in political econom% infl"ence economic development#kill: Concept!b$ective: .

11) Comm"nism primaril% relies on a s%stem of <<<<<<<<+A) private b"siness ownershipB) competitive pricing and marketingC) market,generated s"ppl% and demand

D) government controlled economic activit%Answer: DDiff: 2earning !"tcome: Describe how differences in political econom% infl"ence economic development#kill: Concept!b$ective: .

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12) n a market econom% the patterns of reso"rce allocation are most directl% infl"enced b% <<<<<<<<+A) government administrators who monitor the e4"ilibri"m of s"ppl% and demandB) ind"str% coalitions that strive to improve the efficienc% of prod"ction and serviceC) cons"mer gro"p alliances that negotiate with firms to improve prod"ct 4"alit%D) cons"mers who vote b% their personal decision to b"% or not b"% prod"ctsAnswer: DDiff: 2

earning !"tcome: Describe how differences in political econom% infl"ence economic development#kill: Concept!b$ective: .

1.) A s%stem in which individ"als rather than the government make the ma$orit% of economic decisionsis commonl% referred to as a <<<<<<<<+A) command econom%B) market econom%C) private econom%D) mi*ed econom%Answer: B

Diff: 1#kill: Concept!b$ective: .

16) 7arket economies are primaril% characteri/ed b% <<<<<<<<+A) formal cooperation among government companies and workers to achieve stable growthB) heav% government spending and high ta*ation to pa% for a range of social servicesC) minimal governmental participationD) restricted cons"mer powersAnswer: CDiff: 2

earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept!b$ective: .

1;) n a command econom% the goods and services that a co"ntr% prod"ces the 4"antit% in which the%are prod"ced and the prices at which the% are sold are planned b% <<<<<<<<+A) government officialsB) private ind"striesC) individ"al entreprene"rsD) local trade associations

Answer: ADiff: 1earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept!b$ective: .

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1=) n a command econom% <<<<<<<<+A) b"sinesses and cons"mers are ass"med to be the best $"dges of how reso"rces sho"ld be allocatedB) the government sets goals and determines the price and 4"antit% of what is prod"cedC) different economic sectors coordinate the activities of the federal governmentD) each enterprise sets its goals before making reports to the central governmentAnswer: BDiff: 2

earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept!b$ective: .

1@) n Co"ntr% all dimensions of economic activit% incl"ding pricing and prod"ction decisions aredetermined b% the central government+ &hich term best describes Co"ntr% ?A) market econom%B) mi*ed econom%C) command econom%D) democratic econom%

Answer: CDiff: 2earning !"tcome: Describe how differences in political econom% infl"ence economic development#kill: Application!b$ective: .

1() &hich of the following is most t%pical of a command econom%?A) Cons"mers have choices of man% s"bstit"tes for an% given prod"ct+B) "alit% of prod"cts and services tends to be consistent+C) The prices of goods and services fre4"entl% change+D) 7an% prod"cts are "s"all% in short s"ppl%+

Answer: DDiff: 2earning !"tcome: Describe how differences in political econom% infl"ence economic development#kill: Application!b$ective: .

1') n a <<<<<<<< econom% certain sectors of the econom% are left to private ownership and free marketmechanisms while other sectors have significant state ownership and government planning+A) state,directedB) marketC) command

D) mi*edAnswer: DDiff: 1#kill: Concept!b$ective: .

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2) #ome co"ntries opt for a mi*ed economic s%stem in the belief that altho"gh an economic s%stemsho"ld aspire to achieve the efficiencies created b% free markets it m"st also s"pport policies to <<<<<<<<+A) destabili/e povert% ratesB) achieve low "nemplo%mentC) restrict economic growthD) ine4"itabl% distrib"te wealth

Answer: BDiff: 2earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept!b$ective: .AAC#B: D%namics of the global econom%

21) n the -conomic >reedom nde* <<<<<<<< e*hibit high economic freedom whereas <<<<<<<<e*hibit little to no economic freedom+A) mi*ed economies market economies

B) command economies market economiesC) market economies command economiesD) centrall% planned economies command economiesAnswer: CDiff: 2#kill: Concept!b$ective: .

22) &hich of the following co"ntries is the best e*ample of a mi*ed economic model?A) nited #tatesB) >rance

C) nited 0ingdomD) A"straliaAnswer: BDiff: 2#kill: Concept!b$ective: .

2.) Co"ntr% is in the process of transforming from a command econom% to a market econom%+ This process most likel% involves <<<<<<<<+A) standardi/ed proced"res implemented b% the stateB) high economic growth rates for the long,term

C) privati/ation of man% factors of prod"ctionD) violent political and legal "pheavalAnswer: CDiff: 2earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Application!b$ective: .AAC#B: D%namics of the global econom%

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26) n a co"ntr% that practices state capitalism all of the following are most likel% to be handled b% thestate -C-8T <<<<<<<<+A) leveraging control of the financial s%stemB) developing national corporationsC) s"pporting the local activities of foreign competitorsD) s%stematicall% managing trade relations

Answer: CDiff: 2earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept!b$ective: 6AAC#B: D%namics of the global econom%

2;) Eross national income FE) the broadest meas"re of economic activit% for a co"ntr% is defined asthe <<<<<<<<+A) total of all cons"mption and investment that takes place in a national econom%

B) income generated in one co"ntr% regardless of who owns the prod"ctive assetsC) total of all economic activit% in one co"ntr% less services s"ch as government administration healthservices and ed"cationD) income generated b% both total domestic prod"ction and the international prod"ction activities ofnational companiesAnswer: DDiff: 2#kill: Concept!b$ective: ;

2=) n comp"ting E the val"e of a >ord car that is man"fact"red in 7e*ico "sing capital from the

nited #tates wo"ld <<<<<<<<+A) be added to the E of the nited #tates as well as to the E and ED8 of 7e*icoB) not be added to the E of the nited #tates b"t wo"ld be added to the E of 7e*icoC) onl% affect the comp"tation of ED8 and have no bearing on ED) be added to the E of the nited #tates b"t not the E of 7e*icoAnswer: DDiff: .#kill: Application!b$ective: ;AAC#B: Anal%tic #kills

2@) The meas"re of the val"e of prod"ction that occ"rs within a co"ntr%3s borders witho"t regard towhether the prod"ction is done b% domestic or foreign factors of prod"ction is its<<<<<<<<+A) net national prod"ct F8)B) gross national prod"ct FE8)C) gross domestic prod"ct FED8)D) gross national income FE)Answer: CDiff: 1#kill: Concept

@



!b$ective: ;

2() To determine whether the standard of living within a co"ntr% is rising or falling economists wo"ldmost likel% "se which of the following meas"res?A) per capita EB) E growth rateC) p"rchasing power parit%

D) degree of h"man developmentAnswer: BDiff: 2#kill: Concept!b$ective: ;

2') -ileen a manager at an international resta"rant chain wants to know if it will be most cost effectiveto b"% 1 po"nds of s"gar in Co"ntr% or in Co"ntr% G "sing +#+ dollars+ &hich of the following is-ileen most likel% tr%ing to determine?A) p"rchasing power parit%B) economic growth rate

C) gross domestic incomeD) gross national prod"ctAnswer: ADiff: 2#kill: Application!b$ective: ;

.) The nited ations3 <<<<<<<< meas"res life e*pectanc% ed"cational attainment and the standard of living in a given co"ntr%+A) 5"man Development nde*B) -merging -conomic #tabilit%

C) Een"ine 8rogress ndicator D) et ational 8rod"ctAnswer: ADiff: 1#kill: Concept!b$ective: ;

.1) The 5"man Development nde* meas"res the average achievements in a co"ntr% on three basicdimensions of h"man development incl"ding <<<<<<<<+A) promotion of c"lt"ral val"esB) 4"antit% of free time

C) e*tent of knowledgeD) s"stainabilit%Answer: CDiff: 2#kill: Concept!b$ective: ;

(



.2) The <<<<<<<< starts with the same acco"nting framework "sed to calc"late ED8 b"t then ad$"sts for val"es assigned to environmental 4"alit% pop"lation health livelihood sec"rit% e4"it% free time anded"cational attainment+A) Eross ational nde*B) et ational 8rod"ctC) Een"ine 8rogress ndicator D) 5"man Development nde*

Answer: CDiff: 2#kill: Concept!b$ective: ;

..) <<<<<<<< is a general s"stained rise in prices meas"red against a standard level of p"rchasing power+A) DeflationB) nflationC) -*pansionD) Heflation

Answer: BDiff: 1#kill: Concept!b$ective: ;

.6) &hat is the most likel% reason that a "niversal scheme for assessing the performance and potential of a co"ntr%3s economic environment does !T e*ist?A) diffic"lties of identif%ing a definitive set of predictive economic indicatorsB) a lack of reliable economic data from most developed economiesC) the isolation of most markets from each other D) static nat"re of the marketplace

Answer: ADiff: 2#kill: Concept!b$ective: ;

.;) A worrisome o"tcome of chronic inflation is that it tends to <<<<<<<<+A) erode confidence in a co"ntr%3s c"rrenc%B) give central banking officials e*cessive fle*ibilit% to manage monetar% polic%C) increase the real income of people thereb% inflating their spending and borrowing levelsD) lower cons"mer demand for foreign goods which triggers lower prices and event"all% loweremplo%ment

Answer: ADiff: 2#kill: Concept!b$ective: ;

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.=) n most cases governments <<<<<<<< in order to reg"late inflation+A) lower interest ratesB) increase ta*esC) raise interest ratesD) decrease ta*esAnswer: CDiff: 2

#kill: Concept!b$ective: ;

.@) <<<<<<<< t%picall% res"lts when demand decreases and s"ppl% increases+A) nflationB) Chronic inflationC) HeflationD) DeflationAnswer: DDiff: 1#kill: Concept

!b$ective: ;

.() n the +#+ the "nemplo%ment rate indicates the <<<<<<<<+A) percentage of the labor force that wants to work f"ll,time b"t can onl% find part,time emplo%mentB) n"mber of people who have stopped looking for work beca"se f"ll,time $obs are "navailableC) percentage of "nemplo%ed workers seeking paid work relative to the total labor forceD) n"mber of workers eligible for government services and "nemplo%ment benefitsAnswer: CDiff: 2#kill: Concept!b$ective: ;

.') The so,called miser% inde* is the s"m of a co"ntr%3s <<<<<<<<+A) foreign and national debtB) inflation and "nemplo%ment ratesC) "nemplo%ment level and total debtD) trade deficit and long,term inflation rateAnswer: BDiff: 2#kill: Concept!b$ective: ;

6) A government increases its internal debt for all of the following reasons -C-8T which of thefollowing reasons -C-8T <<<<<<<<+A) The ta* s%stem is so poorl% r"n that the government cannot collect all the reven"es it e*pects+B) Eovernment costs s"ch as sec"rit% and social programs e*ceed total ta* reven"es+C) The government borrows mone% from international financial instit"tions+D) #tate,owned enterprises r"n large deficits+Answer: CDiff: .#kill: Concept

1



!b$ective: ;

61) Co"ntr% has a significant amo"nt of e*ternal debt+ &hich of the following is the most likel%ca"se?A) The government of Co"ntr% borrowed mone% from local banks+B) The government of Co"ntr% borrowed mone% from other governments+C) The government of Co"ntr% spent more than it collected in reven"es+

D) The government of Co"ntr% received short,term credits from selling bonds+Answer: BDiff: 2#kill: Application!b$ective: ;

62) neven income distrib"tion <<<<<<<<+A) e*ists in almost ever% co"ntr%B) is largel% a problem for poorer nationsC) primaril% affects people in "rban settingsD) is limited to a small share of the world pop"lation

Answer: ADiff: 2#kill: Concept!b$ective: ;AAC#B: D%namics of the global econom%

6.) &hich of the following is most likel% a >A#- statement abo"t income ine4"alit%?A) The richest 1I of the world3s pop"lation claims as m"ch income as the bottom ;@I+B) E is the most effective tool for estimating the relative wealth of a nation3s citi/ens+C) Among ind"striali/ed nations the +#+ has the largest ine4"alit% gap between rich and poor+D) ncome ine4"alit% between metropolitan and r"ral areas threatens a co"ntr%3s social stabilit%+

Answer: BDiff: .#kill: Concept!b$ective: ;AAC#B: D%namics of the global econom%

66) The &orld Bank reports that appro*imatel% <<<<<<<< percent of the world3s pop"lation is poor+A) ;B) @;C) (D) ';

Answer: CDiff: 2#kill: Concept!b$ective: ;AAC#B: D%namics of the global econom%

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6;) The Eini coefficient estimates a co"ntr%3s <<<<<<<<+A) gross national prod"ctB) economic developmentC) political and legal risk D) income ine4"alit%Answer: DDiff: 1


6=) The <<<<<<<< view calls for companies to develop low,cost high,powered reso"rce,minimi/inginnovations that can be marketed to the billions of people living on less than a few dollars a da%+A) Base of the 8%ramidB) 5ierarch% of eedsC) 5app% 8lanet nde*D) Eini coefficientAnswer: ADiff: 1


6@) &hich of the following is a statement that s"mmari/es all economic transactions between a co"ntr%and the rest of the world d"ring a given period of time?A) trade deficitB) Eini coefficientC) balance of pa%mentsD) p"rchasing power parit%Answer: CDiff: 1


6() The two main categories in the balance of pa%ments are the <<<<<<<<+A) merchandise e*change acco"nt and the services acco"ntB) e*ternal debt and the "nilateral transfers acco"ntC) merchandise trade acco"nt and the capital acco"ntD) c"rrent acco"nt and the capital acco"ntAnswer: DDiff: 2#kill: Concept

!b$ective: ;

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6') n a co"ntr%3s balance of pa%ments the <<<<<<<< tracks all trade activit% in merchandise+A) capital acco"ntB) c"rrent acco"ntC) pa%ment acco"ntD) deficit acco"ntAnswer: BDiff: 2


;) An economic s%stem is the set of str"ct"res and processes that <<<<<<<< in a co"ntr%+A) g"ides the allocation of reso"rces and shapes the cond"ct of b"siness activitiesB) directs the movement of specific prod"cts to specific cons"mersC) sets the standards of competitive s"ccess for companies in the econom%D) stip"lates the roles and responsibilities of cons"mersAnswer: ADiff: 1#kill: Concept

!b$ective: .

;1) 8ender 8harmace"ticals is considering e*panding overseas and is foc"sing primaril% on the BHCs+&hich of the following co"ntries is one that 8ender is considering?A) ndonesiaB) ChileC) H"ssiaD) BangladeshAnswer: CDiff: 2#kill: Application

!b$ective: ;

;2) Ta%lor -nterprises wants to e*pand its operations into Asia+ 7anagers are foc"sing on co"ntries withhigh degrees of economic freedom most likel% beca"se the firm is interested in a co"ntr% with <<<<<<<<+A) minimal government interventionB) standardi/ed minim"m wagesC) laws favoring s"stainabilit%D) state,r"n corporationsAnswer: ADiff: 2

earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Application!b$ective: 2

1.



;.) Tat"m 7an"fact"ring recentl% opened a new facilit% in 5ong 0ong+ The firm can most likel% e*pectthe 5ong 0ong government to <<<<<<<<+A) monitor market pricesB) control nat"ral reso"rcesC) ens"re fair competitionD) provide innovation incentivesAnswer: C

Diff: 2earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Application!b$ective: .AAC#B: D%namics of the global econom%

;6) 8resentl% which of the following co"ntries is best characteri/ed as a p"re e*ample of a commandeconom%?A) H"ssiaB) ib%a

C) ChinaD) 9ietnamAnswer: BDiff: 2#kill: Concept!b$ective: .

;;) A firm with operations in Denmark can most likel% e*pect all of the following -C-8T <<<<<<<<+A) high ta*esB) significant reg"lationC) to"gh $ob,protection laws

D) minimal monetar% policiesAnswer: DDiff: 2earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Application!b$ective: .

;=) According to the concept of green economics meas"ring a co"ntr%3s economic performance sho"ldalso take into acco"nt <<<<<<<<+A) market share

B) pop"lation si/eC) ecological costsD) cost,of,living increasesAnswer: CDiff: 1earning !"tcome: Disc"ss the role of ethics and social responsibilit% in international b"siness#kill: Concept!b$ective: ;

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;@) &hich of the following calls for economic activit% that meets present needs witho"t hindering thef"t"re needs of societ%?A) privati/ationB) state capitalismC) economic freedomD) s"stainable developmentAnswer: D

Diff: 1earning !"tcome: Disc"ss the role of ethics and social responsibilit% in international b"siness#kill: Concept!b$ective: ;

;() &hich of the following ideas calls for assessing a co"ntr%3s performance based on factors s"ch aslife e*pectanc% leis"re time and income e4"alit%?A) microeconomicsB) happ%nomicsC) macroeconomicsD) green economics

Answer: BDiff: 1#kill: Concept!b$ective: ;

;') D"ring a time of reflation the government is most likel% to <<<<<<<<+A) lower ta*esB) print mone%C) red"ce interest ratesD) s"pport infrastr"ct"reAnswer: B

Diff: 2#kill: Concept!b$ective: ;

=) &hich of the following governmental actions is -A#T likel% to increase national debt?A) macroeconomic stim"l"s plansB) "nemplo%ment benefitsC) corporate bailo"tsD) T,bond salesAnswer: DDiff: 2

#kill: Application!b$ective: ;

1;



=1) n the aftermath of the recent worldwide credit crisis there has been a significant red"ction in thelevel of government involvement in economic affairs+Answer: >A#-Diff: 2earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept

!b$ective: 1

=2) &hen anal%/ing the ke% elements of a co"ntr%3s economic environment it is best to appl% a s%stems perspective+Answer: TH-Diff: 2#kill: Concept!b$ective: 1

=.) Eross domestic prod"ct is the val"e of prod"ction that takes place within a nation3s border witho"tregard to whether the prod"ction is done b% domestic or foreign factors of prod"ction+

Answer: TH-Diff: 1#kill: Concept!b$ective: ;

=6) A car man"fact"red in the +#+ b% To%ota wo"ld be incl"ded in the calc"lation of the ED8 for thenited #tates+Answer: TH-Diff: 2#kill: Application!b$ective: ;

AAC#B: Heflective thinking skills

=;) The calc"lation of E per capita takes into acco"nt the differences in the cost of living from oneco"ntr% to another+Answer: >A#-Diff: 2#kill: Concept!b$ective: ;

==) -conomic indicators s"ch as E and its e*pression in terms of per capita growth rate and 888 arenot s"fficient to develop a clear pict"re of the overall 4"alit% of life in a co"ntr%+

Answer: TH-Diff: 2#kill: Concept!b$ective: ;

1=



=@) The 5"man Development nde* meas"res the average achievements in a co"ntr% on three basicdimensions of h"man development: mortalit% knowledge and standard of living+Answer: TH-Diff: 2#kill: Concept!b$ective: ;

=() nflation occ"rs beca"se aggregate demand is growing as fast as aggregate s"ppl%+Answer: >A#-Diff: 2#kill: Concept!b$ective: ;

=') nflation affects interest rates e*change rates the cost of living general economic confidence andthe stabilit% of the c"rrent political s%stem+Answer: TH-Diff: 1#kill: Concept

!b$ective: ;

@) The so,called miser% inde* is the s"m of a co"ntr%3s inflation and "nemplo%ment rates+Answer: TH-Diff: 2#kill: Concept!b$ective: ;

@1) -*ternal debt res"lts when the government spends more than it collects in reven"es whereas internaldebt res"lts when a government borrows mone% from foreign lenders+Answer: >A#-


@2) neven income distrib"tion is largel% a problem confined to poorer nations+Answer: >A#-Diff: 2#kill: Concept!b$ective: ;AAC#B: 7"ltic"lt"ral and diversit% "nderstanding

@.) There is a strong relationship between skewed income distrib"tions and the split between those wholive in "rban settings vers"s those who live in r"ral areas+Answer: TH-Diff: 2#kill: Concept!b$ective: ;AAC#B: 7"ltic"lt"ral and diversit% "nderstanding

1@



@6) The balance of trade records is a record of a co"ntr%3s international transactions that take placeamong companies governments or individ"als+Answer: >A#-Diff: 1#kill: Concept!b$ective: ;

@;) n a co"ntr%3s balance of pa%ments the c"rrent acco"nt and the capital acco"nt represent e4"alval"es+Answer: >A#-Diff: 2#kill: Concept!b$ective: ;

@=) An economic s%stem is the set of str"ct"res and processes that g"ides the allocation of reso"rces andshapes the cond"ct of b"siness activities within a co"ntr%+Answer: TH-Diff: 1

#kill: Concept!b$ective: .

@@) The range of economic s%stems in the world toda% when represented on a spectr"m has one endanchored b% the idea of capitalism the other with that of socialism+Answer: >A#-Diff: 2#kill: Concept!b$ective: .AAC#B: D%namics of the global econom%

@() A market econom% gives individ"als the freedom to decide where to work doing what how to spendor save mone% and whether to cons"me now or later+Answer: TH-Diff: 1earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept!b$ective: .AAC#B: D%namics of the global econom%

@') A market econom% is one in which reso"rces are primaril% owned and controlled b% individ"als and

companies+Answer: TH-Diff: 1earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept!b$ective: .AAC#B: D%namics of the global econom%

1(



() n a command econom% the goods and services that a co"ntr% prod"ces the 4"antit% in which the%are prod"ced and the prices at which the% are sold are all planned b% the government+Answer: TH-Diff: 1earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept

!b$ective: .AAC#B: D%namics of the global econom%

(1) The government considers itself a better $"dge of reso"rce allocation than b"sinesses or citi/ens in amarket econom%+Answer: >A#-Diff: 2earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept!b$ective: .

(2) n a mi*ed econom% all dimensions of economic activit% incl"ding pricing and prod"ctiondecisions are determined b% a central government plan+Answer: >A#-Diff: 1earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept!b$ective: .

(.) A mi*ed econom% is a s%stem where economic decisions are largel% market driven and ownership is

largel% private b"t the government intervenes in man% private economic decisions+Answer: TH-Diff: 1earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept!b$ective: .

(6) There is a positive correlation between economic freedom and economic growth+Answer: TH-Diff: 2

earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept!b$ective: 2

1'



(;) The collapse of comm"nism in the late 1'(s and earl% 1''s led to a more widespread adoption ofthe principles of capitalism+Answer: TH-Diff: 2#kill: Concept!b$ective: .AAC#B: D%namics of the global econom%

(=) n response to the global credit crisis the nited #tates government took actions that increasedeconomic freedom+Answer: >A#-Diff: 2earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Concept!b$ective: 2AAC#B: D%namics of the global econom%

(@) The BHCs are the strongest developed economies in the world+Answer: >A#-Diff: 1#kill: Concept!b$ective: ;

(() Between 2 and 2( China3s econom% grew at a faster rate than Japan3s econom%+Answer: TH-Diff: 1#kill: Concept!b$ective: ;

(') The 5app% 8lanet nde* meas"res well,being and perceptions of living conditions b% assessing areass"ch as ho"sing incomes sec"rit% and work,life balance+Answer: >A#-Diff: 2#kill: Concept!b$ective: ;

') n most cases if the miser% inde* of a co"ntr% is high then cons"mers and b"sinesses are less likel%to spend and invest+Answer: TH-


2



'1) &hat is gross national income? 5ow is it calc"lated? ll"strate %o"r answer with a specific e*ample+Answer: Eross ational ncome is the broadest meas"re of economic activit%+ t is the market val"e offinal goods and services newl% prod"ced b% domesticall% owned factors of prod"ction which incl"desthe international prod"ction activities of national companies+ >or e*ample the val"e of a >ord carman"fact"red in the nited #tates and the portion of the val"e of a >ord man"fact"red in 7e*ico "sing+#+ capital and management co"nts in +#+ E+ 5owever the portion of the val"e of a JapaneseTo%ota man"fact"red in the nited #tates "sing Japanese capital and management wo"ld not be co"nted

in +#+ E b"t it wo"ld be co"nted in Japanese E+Diff: .earning !"tcome: Define the f"ndamental concepts of international b"siness#kill: Critical Thinking!b$ective: ;AAC#B: Anal%tic #kills

'2) &hat general characteristics of a co"ntr% sho"ld managers consider when anal%/ing an economicenvironment? &hat specific indicators help managers meas"re the economic development performanceand potential of a co"ntr%?Answer: 7anagers appl% three perspectives to help make sense of the economic environments of

vario"s co"ntries+ >irst the% estimate how m"ch freedom the% will have to make investments and r"noperations as the% see fit+ #econd the% eval"ate the t%pe of economic s%stem in the co"ntr% st"d%inghow c"rrent policies shape development and performance+ The third investigates the points of changethat drive economic change assessing the conditions that moderate economic freedom as well as move aco"ntr% from one economic s%stem to another+ Collectivel% the insights help managers pinpoint whereinvestments sho"ld go and perhaps more importantl% where the% sho"ld not+ The ke% dimension "sedto disting"ish one co"ntr% from another is the gross national income FE)+ n partic"lar co"ntries areclassified according to per capita E or the si/e of E of a nation divided b% its total pop"lation+Those co"ntries with high pop"lations and high per capita E are generall% most desirable in terms ofmarket potential+ A co"ntr%3s E growth rate also indicates its economic potential+ B"sinessescomparing markets will also likel% e*amine the p"rchasing power parit% F888) of a possible foreign

market+Diff: .earning !"tcome: Define the f"ndamental concepts of international b"siness#kill: #%nthesis!b$ective: 1 ;AAC#B: Anal%tic #kills

'.) &hat is inflation? 5ow does inflation affect international b"siness?Answer: nflation means that prices are going "p as meas"red against a standard level of p"rchasing power+ The inflation rate is the percentage increase in the change in prices from one period to the ne*t"s"all% a %ear+ -conomists "se different t%pes of indices to meas"re inflation+ n the nited #tates the

Cons"mer 8rice nde* is the official meas"re of inflation+ The C8 meas"res a fi*ed basket of goods andcompares their prices from one period to the ne*t+ A rise in the inde* res"lts in inflation+ nflation affectsinterest rates e*change rates the cost of living and the general confidence in a co"ntr%3s political andeconomic s%stem+Diff: .earning !"tcome: Define the f"ndamental concepts of international b"siness#kill: Critical Thinking!b$ective: ;AAC#B: Heflective thinking skills

21



'6) Describe the three wa%s economies can be categori/ed+ &hich one do %o" believe is best? &h%?Answer:a+ 7arket econom%: A market econom% is one in which reso"rces are primaril% owned and controlled b% the private sector not the p"blic sector+ The ke% factors that make the market econom% work arecons"mer sovereignt% and freedom of companies to operate in the market+ 8rices are determined b%s"ppl% and demand+

b+ Command econom%: n a command econom% also known as a centrall% planned econom% alldimensions of economic activit% incl"ding pricing and prod"ction decisions are determined b% a centralgovernment plan+ The government owns and controls all reso"rces+ The government sets goals for ever% b"siness enterprise in the co"ntr% b% how m"ch the% prod"ce and for whom+ n this t%pe of econom%the government considers itself a better $"dge of reso"rce allocation than its b"sinesses or citi/ens+c+ 7i*ed econom%: n act"alit% no econom% is p"rel% market or completel% command oriented+ 7osteconomies are mi*ed economies falling in the middle and combining elements of both+ n a mi*edeconom% economic decisions are principall% market driven and ownership is principall% private b"t thegovernment intervenes from slightl% to e*tensivel% in reso"rce allocations and economic decisions+Diff: .earning !"tcome: Disc"ss arg"ments for and against government intervention in international

b"siness#kill: Critical Thinking!b$ective: .AAC#B: Anal%tic #kills

';) &hat is meant b% the idea of economic freedom? &hat factors are "sed in the -conomic >reedomnde*? >or managers what role does the -conomic >reedom nde* pla% in anal%/ing the potential of aco"ntr%?Answer:a+ -conomic freedom is the absol"te right of propert% ownership f"ll% reali/ed freedoms ofmovement for labor capital and goods and an absol"te absence of coercion or constraint of economic

libert% be%ond the e*tent necessar% for citi/ens to protect and maintain libert% itself+ Hather than thestate individ"als decide how the% wish to work prod"ce cons"me save and invest+ mportantl% thatfreedom is both protected b% the state as well as "nconstrained b% the state+ b+ The economic factors on which the inde* of economic freedom is based are trade freedom b"sinessfreedom monetar% freedom investment freedom freedom from corr"ption freedom from government propert% rights financial freedom and labor freedom+c+ The st"d% is helpf"l in that it identifies wa%s that governments control economic activit% and thedegree to which the% do so+ !perationall% this inde* helps managers "nderstand the degree to which thegovernment of a co"ntr% intervenes with the principles of free choice free enterprise and free prices forreasons that go be%ond the basic need to protect propert% libert% citi/en safet% and market efficienc%+This information helps managers make better plans to invest f"nds and r"n operations in a partic"lar

co"ntr%+Diff: .earning !"tcome: Define the f"ndamental concepts of international b"siness#kill: #%nthesis!b$ective: 2 ;AAC#B: Anal%tic #kills

22



'=) &hat is state capitalism? &h% do %o" think state capitalism is becoming increasingl% pop"lararo"nd the world?Answer: #tate Capitalism is an economic s%stem whereb% the #tate decides how when and whereassets will be val"ed and reso"rces allocated+ The #tate develops national champions manages traderelations and e*change rates to promote e*ports and p"nish imports leverages control of the financials%stem to provide low,cost capital to domestic ind"stries and maintains accommodative legal andreg"lator% s%stems+ The global credit crisis has e*panded the scale and scope of #tate Capitalism+

Co"ntries that favored a larger state presence higher ta*es heavier reg"lation to"gher $ob,protectionlaws and more genero"s social safet% programs dealt more s"ccessf"ll% with market disr"ptions thandid their free,market co"nterparts+ 7ore f"ndamentall% #tate Capitalism professes to better protect protected social val"es e4"ali/e income distrib"tion and prevent the acc"m"lation of vast wealth and powerf"l self,interests that threaten social harmon%+Diff: .earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: Critical Thinking!b$ective: 6AAC#B: Heflective thinking skills

'@) &hat is the difference between a developing co"ntr% and a developed co"ntr%? &hat significanttrends are occ"rring in each t%pe of market that relate to international b"siness decisions?Answer: ow, and middle,income nations are known as developing co"ntries+ This t%pe has low percapita income,,an average of K2'=. in 2'+ The vast ma$orit% of their citi/ens have a low standard ofliving with limited access to few goods and services+ Developing co"ntries comprise the largest n"mberof co"ntries F1;1 or so according to the &orld Bank) and have the highest n"mber of inhabitants Facombined ;+; billion) in the world+ n contrast developed co"ntries are those with high per capitaincome,, an average of K.@'@ in 2'+ Their citi/ens have a high standard of living with access to avariet% of goods and services+ -merging economies are developing rapidl% and have increased theirshare of the world3s foreign e*change reserves b% @I since the mid,1''s+ #ince 21 ann"al growth

in emerging markets has averaged =+6 percent in contrast the rich economies have averaged 1+= percent+ &hile the% e*pand the global financial crisis slows and shrinks man% developed economies+Diff: .earning !"tcome: Describe how differences in political econom% infl"ence economic development#kill: #%nthesis!b$ective: 1 ;AAC#B: D%namics of the global econom%

2.



'() &hat iss"es complicate international economic anal%sis?Answer: nternational economic anal%sis "ses man% scientific principles b"t still relies on a variet% of behavioral ass"mptions to interpret activit%+ Assessments are often more conditional than "niversal beca"se the comple*it% of even the simplest economic s%stem defies straightforward classification+#tip"lating indicators that definitivel% represent a co"ntr%3s economic performance and potential isdiffic"lt+ #econdl% marketplace d%namism means that toda%3s valid meas"res ma% prove invalidtomorrow+ Third co"ntries are not isolated+ The conse4"ence of connections is an integrated s%stem of

markets in which actions in one infl"ences o"tcomes in others+ nterdependencies complicateinterpretations+ Ad$"sting anal%sis for actions and reactions across a broad scope of markets is diffic"lt+Diff: .earning !"tcome: Define the f"ndamental concepts of international b"siness#kill: Critical Thinking!b$ective: 1AAC#B: D%namics of the global econom%

'') &hat is the difference between a command econom% and state capitalism?Answer: #tate Capitalism is an economic s%stem whereb% the #tate decides how when and whereassets will be val"ed and reso"rces allocated+ The #tate develops national champions manages trade

relations and e*change rates to promote e*ports and p"nish imports leverages control of the financials%stem to provide low,cost capital to domestic ind"stries and maintains accommodative legal andreg"lator% s%stems+ n a command econom% the government owns and controls reso"rces commandingthe a"thorit% to decide what prod"cts to make in what 4"antit% at what price and in what wa%+ nlikethe command econom% #tate Capitalism is a s%stem whereb% the government e*plicitl% manip"latesmarket o"tcomes for political p"rposes+ 8olitics has a profo"nd and pervasive impact on the performance of markets+ The government "ses markets to promote stabilit% and growth thereb% creatingthe prosperit% and wealth that ma*imi/e state power and s"pports its contin"ed r"le+ #tate Capitalismdoes not have an ideological component,,the government manages markets for long,term politicals"rvival and power pro$ection not to enforce an abstract ideal or promote the c"lt of personalit% as withthe command econom%+

Diff: .earning !"tcome: Disc"ss arg"ments for and against government intervention in international b"siness#kill: #%nthesis!b$ective: . 6

26



1) &h% is economic freedom an important factor to consider when anal%/ing a co"ntr%3s economicdevelopment performance and potential?Answer: -conomic freedom helps e*plain a co"ntr%3s development performance and potential+ 5igher,rated co"ntries generall% o"tperform laggards on a variet% of meas"res+ Co"ntries with high economicfreedom have higher rates of growth and prod"ctivit%+ ncome is higher in co"ntries with highereconomic freedom it more than do"bles the worldwide average and is @ times higher than in mostl%"nfree and repressed economies+ 8ositive relationships e*ist between economic freedom inflation and

emplo%ment+ -conomic freedom pa%s social dividends+ ife e*pectanc% literac% political openness andenvironmental s"stainabilit% show positive relationships with economic freedom+ Collectivel% dataindicate a positive relationship between economic freedom and vario"s meas"res of economic performance and 4"alit% of life+ The data s"pport the arg"ment that liberating reso"rces fromgovernment control improves financial performance economic stabilit% and standards of living+Diff: .earning !"tcome: Describe how differences in political econom% infl"ence economic development#kill: #%nthesis!b$ective: 2 ;AAC#B: D%namics of the global econom%

international business, 14e (daniels, et al) - chapter 04

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