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BUSI 303 Test 2

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Nations that primarily functioned under the centrally planned economic system prior to the 1980s, such as China and Russia, have embraced the market economy.
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False
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Global business risk is any worldwide factor–outside the laws of supply and demand–that could impact the success or failure of any venture moving into the international arena.
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True
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_____ imposes a waiting period between the determination of a product’s quality and the determination of when it can actually be sold in a market
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Administrative delays
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Which type of risk do managers have some control over?
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Operational
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Operation risk occurs when debtors in a country are unable to ensure timely payments of foreign currency debt service because of either transfer or exchange restrictions or a general lack of foreign currency.
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False
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The WTO was designed to
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Monitor trade around the entire world
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The Organization for Economic Cooperation and Development (OECD), the World Trade Organization, the World Bank, and the International Monetary Fund have all indicated that unstable political systems are the greatest single barrier to economic development worldwide.
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False
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Which of the following is an economic and trade sanctions against targeted foreign countries, groups, organizations, and individuals; can be motivated by political, economic, or moral reasons?
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Embargoes
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Any company considering moving into a foreign economic market must consider the powerful influence of the military and religious leadership.
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True
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Political issues that significantly impact global business include
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Government restriction of trade
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Which of the following is NOT a way that Governments promote trade?
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Import Financing
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_____ are special privileges offered by the government in order to attract businesses to a region or to provide them with the funding to operate successfully.
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Subsidies
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Which of the following is designed to raise revenue for governments and provide a competitive advantage for domestic business?
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Tariffs
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Cultures such as China, North Korea, and Cuba believe that an economic value system should be founded on cumulative efforts, controlled by greater entities or governments.
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True
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Which of the following are designated areas in Customs Ports of Entry that allow commercial merchandise to receive the same customs treatment if would receive if it were outside the commerce of the United States.
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Foreign Trade Zones
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A market economy most often refers to an economic system that is under comprehensive control and regulation by a government, in accordance with the plan of economic development.
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False
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Supplier’s credit is
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Loan in which the exporter is covered, but the value of the cover will be less than the value of the contract.
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Quotas typically
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Raise the price of imports, reduce the volume of imports, and encourage demand for domestically made subsitutes
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Which of the following is NOT a purpose behind embargoes?
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Increasing resources or technology
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The three types of global business risk include ownership, operational risk, and transfer risk.
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True
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Which of the following are types of risk companies are exposed to in International transactions?
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All of the above (Violence and Conflict, Terrorism and Kidnapping, Confiscation and expropriation)
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In 1975, as business and policy makers’ alike saw the potential growth of global business, the World Trade Organization (WTO) was created by several countries in order to monitor trade around the entire world.
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False
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Which of the following places power in the hands of customs officials?
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Foreign Trade Zones
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The U.S. Department of Commerce developed the International Trade Administration (ITA) in order to stimulate economic opportunities for US businesses and their employees.
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True
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The United States Department of the Treasury oversees and enforces all US economic sanctions through the Office of Foreign Assets Control (OFAC)
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True
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Though the World Trade Organization (WTO) has officially existed since 1975, the foundation for the rules in this trading system originates in the GATT.
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False
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In order to achieve economic advantage, a nation should specialize, produce, and export only products where the nation holds an absolute advantage.
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Absolute Advantage Theory
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If a nation’s _____ far exceed its _____, then the balance of payments is out of control, or more simply stated, out of balance.
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Surpluses, deficits
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As organizations become. More involved in the global community, they may opt to purchase land or other resources in other nations. This activity, known as foreign direct investment (FDI), is commonly used to purchase used to purchase real estate and existing properties.
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True
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National can benefit from trade even when one trading partner does not have an absolute advantage on any of the products being traded.
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Comparative Advantage Theory
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The General Agreement on Tariffs and Trade (GATT) was signed on January 1, 1948
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True
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Keeping track of the activity surrounding international trade and investment is done by maintaining a record of all international transactions, otherwise known as the balance of payments (BOP)
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True
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The activity, known as ______ is when companies opt to purchase land or other resources in other nations.
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Foreign Direct Investment
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The equation represents the relationship between trade deficits and surpluses is expressed as: Exports – Investments = Savings – Imports
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False
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Operations of production are moved to a less-developed nation and the cycle is complete as highly-developed nations become importers of this product.
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International Product Life Cycle Theory
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Government interventions may be used to decrease global competitiveness.
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False
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Which of the following NOT true regarding GATT?
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Representatives from twenty nations accepted what would later be considered the persecutor o the EU
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The WTO encourages nations to practice the Golden Rule on a national level, pointing out that foreigners and foreign industry should be treated just like the locals and domestic industries.
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The two ways companies can engage in FDI include
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Greenfield investment and acquisitions
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Which of the following is NOT a strategic goal of FDI?
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Reducing capital and labor costs.
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Socialism is the economic policy of restraining trade between nations.
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False
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The Balance of Payments
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Includes imports, goods, land, people; and financial investments
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All of the following are factors that can affect the international BOP and either create or reduce surpluses and deficits except
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Mergers and acquisitions
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Government interventions may
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(All of the Above) Be used to increase global competitiveness, intervene to keep the balance of payments under control, promote protectionism.
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When considering FDI, the most important consideration facing a corporation is the type of ______ and _____ the investing corporation will have over the foreign entity.
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Ownership, control
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Equity capital is the value of the MNCs investment in shares of an enterprise in a foreign country.
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True
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Governments play a major role in support of technology by crafting industry-specific measures, such as tax credits for research and development of new technologies and trade policies that support essential technology sectors.
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New Trade Theory
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Ownership in foreign entities can be a complete or a controlling stake in the form of either a joint venture or through stock purchases and acquisitions of existing corporations.
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False
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Attempts to explain that nations will produce and export goods that use the highest proportion of those factors of production that are most abundant to a nation
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Factor Proportions Theory
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In mathematical terms the current account is expressed as
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Exports – Imports = Savings – Investments