Question 1. In some countries, bribes are commonplace. If a U.S.-based MNC decides to adhere to a strict code of ethics and not pay bribes, its subsidiary may be at a competitive disadvantage in the foreign country.
A) True
B) False
Question 2. Which of the following theories identifies specialization as a reason for international business?
A) Theory of comparative advantage.
B) Imperfect markets theory.
C) Product cycle theory.
D) None of the above
Question 3. According to the text, products and services are generally becoming _______ standardized across countries, which tends to _______ the globalization of business.
A) more; encourage
B) more; discourage
C) less; discourage
D) less; encourage
Question 4. Which of the following is an example of direct foreign investment?
A) Exporting to a country
B) Establishing licensing arrangements in a country
C) Purchasing existing companies in a country
D) Investing directly (without brokers) in foreign stocks
Question 5. A high home inflation rate relative to other countries would _______ the home country's current account balance, other things equal. A high growth in the home income level relative to other countries would _______ the home country's current account balance, other things equal.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase
Question 6. Over time, international trade (exports plus imports) as a percentage of GDP has:
A) Increased for most major countries.
B) Decreased for most major countries.
C) Stayed about constant for most major countries.
D) Increased for about half the major countries and decreased for the others.
Question 7. A weak home currency may not be a perfect solution to correct a balance of trade deficit because:
A) It reduces the prices of imports paid by local companies.
B) It increases the prices of exports by local companies.
C) It prevents international trade transactions from being prearranged.
D) Foreign companies may reduce the prices of their products to stay competitive.
Question 8. A balance-of-trade surplus indicates an excess of merchandise imports over merchandise exports.
A) True
B) False
Question 9. Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid ask percentage spread is:
A) about 4.44%.
B) about 4.26%.
C) about 4.03%.
D) about 4.17%.