The Free Trade Area of the Americas (FTAA) is a trade agreement ________.

that has been proposed to create the largest free trade area on the planet More test answers on https://studyhippo.com/global-test-2/

Free Trade Area test questions and answers | Get Access To Free Trade Area Flashcards and exam tests

Q: Which feature of a customs union differentiates it from a free trade area?

Adoption of a common external trade policy More test answers on https://studyhippo.com/ib-chapter-9/

Q: _____ occurs when lower-cost external suppliers are replaced by higher-cost suppliers within a free trade area.

Correct Trade diversion More test answers on https://studyhippo.com/bus-280-q-9/

Q: Trade diversion occurs when higher-cost external producers are replaced by lower-cost external producers within the free trade area. TRUE or FALSE

False More test answers on https://studyhippo.com/mgt-302-ch-9/

Q: The most enduring free trade area in the world is the:

European Free Trade Association More test answers on https://studyhippo.com/global-91011/

Q: In addition to NAFTA, the only other significant trade bloc in the Americas is Free Trade Area of the Americas (FTAA).

True More test answers on https://studyhippo.com/ib-chapter-9/

Q: The country of Argonia and the country of Berylia imposed tariffs on imports from all countries. They set up a free trade area, removing all trade barriers between themselves but maintaining tariffs on imports from the rest of the world. Argonia now begins to import sugar from Berylia. Previously, Argonia was indigenously producing sugar at a higher cost. Thus, Argonia benefits from this transaction. This is known as _____.

Correct trade creation More test answers on https://studyhippo.com/bus-280-q-9/

Q: Core part: Free Trade Area

-all barriers to the trade of goods and services among member countries are removed. no discriminatory tariffs, quotas, subsidies, or administrative impediments are allowed to distort trade between members. -each country is allowed to determine trade policies More test answers on https://studyhippo.com/international-management-ch-9/

Home Page Social Science Economics International Economics Free Trade Area

We've found 9 Free Trade Area tests

Business Management European Free Trade Association Free Trade Area International Business Regional Economic Integration

BUS 280 q.9 – Flashcards 90 terms

Kevin Stewart

90 terms

Preview

BUS 280 q.9 – Flashcards

question

The country of Argonia and the country of Berylia imposed tariffs on imports from all countries. They set up a free trade area, removing all trade barriers between themselves but maintaining tariffs on imports from the rest of the world. Argonia now begins to import sugar from Berylia. Previously, Argonia was indigenously producing sugar at a higher cost. Thus, Argonia benefits from this transaction. This is known as _____.

answer

Correct trade creation

question

Which of the following is true of the criteria to qualify for membership to the European Union (EU)?

answer

Correct The applicants were required to tame inflation.

question

_____ occurs when lower-cost external suppliers are replaced by higher-cost suppliers within a free trade area.

answer

Correct Trade diversion

question

Which of the following is true of the Andean Pact of 1969?

answer

Correct Political and economic problems seem to have hindered cooperation among member-countries of the Andean Pact.

question

Which of the following is the goal of the Caribbean Single Market and Economy?

answer

Correct To harmonize macroeconomic and monetary policy between member states

question

A(n) _____ is defined as a central political apparatus that coordinates the economic, social, and foreign policy of the member states.

answer

Correct political union

question

Which of the following is a solution to the issue of how to make a coordinating bureaucracy accountable to the citizens of member nations?

answer

Correct Establishment of a political union

question

The European Community was established with the signing of the _____ in 1957.

answer

Correct Treaty of Rome

question

Which of the following refers to an association of English-speaking Caribbean states that are attempting to establish a customs union?

answer

Correct CARICOM

question

Three countries enter into an agreement to remove all tariffs and trade barriers between them. They decide on a common trade policy with regard to nonmembers. Faced with political backlash, the countries stop short of allowing mobility of factors of production such as labor and capital. Which of the following levels of economic integration best describes this arrangement?

answer

Correct Customs union

question

Which of the following is a reason why Mercosur was temporarily suspended in 2001?

answer

Correct An economic crisis in Argentina

question

Which of the following is a drawback of adopting the euro?

answer

Correct Loss of control over national monetary policy

question

The _____ refers to a trade pact among Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, which began in the early 1960s but collapsed in 1969 due to war.

answer

Correct Central American Common Market

question

Which of the following is a reason for Great Britain, Denmark, and Sweden to stay out of the euro zone?

answer

Correct The implied loss of national sovereignty to the European Central Bank

question

_____ occurs when high-cost domestic producers are replaced by low-cost producers within a free trade area.

answer

Correct Trade creation

question

Which of the following is true about how the euro will impact the pan-European capital market?

answer

Correct It will increase efficiency with which investment funds are allocated.

question

Which of the following is true about the European Commission?

answer

Correct The European Union's competition commissioner has been gaining influence as the chief regulator of competition policy in the member-nations of the European Union.

question

Which of the following levels of economic integration involves the use of a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy?

answer

Correct Economic union

question

Which of the following entails a closer economic integration and cooperation than a common market?

answer

Correct Economic union

question

Which of the following is an issue confronting the North American Free Trade Agreement?

answer

Correct Expanding the membership of the agreement

question

The _____ is composed of one representative from the government of each member-state, and whose membership depends on the topic being discussed.

answer

Correct European Council

question

Which of the following is true of the Single European Act?

answer

Correct The act provided the impetus for the restructuring of substantial sections of European industry.

question

Which of the following comprises the euro zone?

answer

Correct The 17 member nations who use euro as its currency

question

Which of the following is true of the Asia-Pacific Economic Cooperation (APEC)?

answer

Correct It was founded in 1990 at the suggestion of Australia.

question

An argument against the North American Free Trade Agreement centered on the fear that ratification would result in:

answer

Correct mass exodus of jobs from the United States into Mexico.

question

The European Council considered to be the ultimate controlling authority within the European Union (EU) because:

answer

Correct draft legislation from the European Commission can become EU law only if the council agrees.

question

The _____ is responsible for proposing European Union legislation, implementing it, and monitoring compliance with European Union laws by member states.

answer

Correct European Commission

question

Which of the following is a consequence of the implementation of the North American Free Trade Agreement?

answer

Correct Some U.S. and Canadian firms would move production to Mexico to take advantage of lower labor costs.

question

Which of the following led to the collapse of the Central American Common Market in 1969?

answer

Correct War between Honduras and El Salvador after a riot at a soccer match between teams from the two countries

question

Which of the following is true of regional economic integration?

answer

Correct By creating a single market, the EU aimed to lower the price for goods and services across the bloc.

question

Which of the following is true of the Treaty of Lisbon that was signed in 2007?

answer

Correct It created the position of the president of the European Council.

question

The _____ refers to a 1969 agreement among Bolivia, Chile, Ecuador, Colombia, and Peru to establish a customs union.

answer

Correct Andean Pact

question

In the context of international labor relations, which of the following is a concern of organized labor?

answer

Correct An international business keeps highly skilled tasks in its home country and farms out only low-skilled tasks to foreign plants.

question

Which of the following is an advantage of an ethnocentric staffing policy?

answer

Correct It helps transfer core competencies to a foreign operation.

question

According to the survey undertaken by Towers Perrin, which of the following countries provides the highest pay to HR executives?

answer

Correct The United States

question

In firms following a(n) _____ staffing policy, the lack of managers' mobility among national operations implies that the pay for expatriates should be kept country specific.

answer

Correct polycentric

question

Firms that use an ethnocentric staffing policy consider it to be:

answer

Correct the best way to maintain a unified corporate culture.

question

Which of the following is a disadvantage of adopting a geocentric staffing approach?

answer

Correct Training and relocation costs increase when transferring managers from country to country.

question

A(n) _____ staffing policy seeks the best people for key jobs throughout the organization, regardless of nationality.

answer

Correct geocentric

question

Which of the following staffing policies relies extensively on the use of expatriate managers?

answer

Correct Ethnocentric staffing policy

question

A firm's ability to reduce its use of expatriates may be limited, particularly if it is pursuing a(n) _____ staffing policy.

answer

Correct geocentric

question

Broadly speaking, a(n) _____ staffing approach is compatible with an international strategy.

answer

Correct ethnocentric

question

Which of the following is a major obstacle to the establishment of the Free Trade Area of the Americas?

answer

Correct The United States wants its southern neighbors to agree to tougher enforcement of intellectual property rights, which they do not want to embrace.

question

A(n) _____ has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members.

answer

Correct common market

question

Which of the following is true with regard to establishment of the euro?

answer

Correct It required participating national governments to give up control over monetary policy.

question

Which of the following are the two impediments to regional economic integration?

answer

Correct Costs and national sovereignty

question

Which of the following is true of the euro since its establishment in 1999?

answer

Correct The euro has had a volatile trading history against the U.S. dollar.

question

Which of the following is true of the Andean Pact during the mid-1980s?

answer

Correct The Pact had failed to achieve the objective of a common external tariff.

question

The _____ proposed that all impediments to the formation of a single market be eliminated by December 31, 1992. The result was the Single European Act.

answer

Correct Delors Commission

question

_____ are the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements.

answer

Correct Free trade agreements

question

_____ refers to the pact among Argentina, Brazil, Paraguay, and Uruguay that originated in 1988 to establish a free trade area.

answer

Correct Mercosur

question

Which of the following is the economic level corresponding to the least integration?

answer

Correct A free trade area

question

The _____, which has 754 members as of 2012, is directly elected by the populations of the member-states.

answer

Correct European Parliament

question

The _____ refers to an attempt to establish a free trade area between Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.

answer

Correct Association of Southeast Asian Nations

question

_____ occurs when higher-cost external producers are replaced by lower-cost external producers within the free trade area?

answer

Correct Trade creation

question

The agreement of the member-states of the Central American Common Market joined by the Dominican Republic to trade freely with the United States is known as _____.

answer

Correct Central American Free Trade Agreement

question

Which of the following organizations, established in 1951, was the forerunner of the European Union?

answer

Correct European Coal and Steel Community

question

Which of the following is true of the Court of Justice?

answer

Correct It is the supreme appeals court for European Union law.

question

Which of the following is true with regard to an economic union?

answer

Correct It involves the free flow of products and factors of production among member-countries.

question

Which of the following is a feature of a common market?

answer

Correct Allows free movement of factors of production between member nations

question

Which of the following was a change proposed by the Single European Act?

answer

Correct Apply the principle of "mutual recognition" to product standards

question

Which of the following countries has adopted the euro as its currency?

answer

Correct France

question

A(n) _____ is defined as a group of countries committed to removing all barriers to the free flow of goods and services between each other, but pursuing independent external trade policies.

answer

Correct free trade area

question

Which of the following is the aim of the Central America Free Trade Agreement?

answer

Correct Lowering of trade barriers between the United States and the Central American Common Market countries

question

Which of the following is true of the East African Community (EAC)?

answer

Correct Their program includes cooperation on immigration, road and telecommunication networks, investment, and capital markets.

question

Which of the following changes were proposed by the Single European Act?

answer

Correct Open public procurement to nonnational suppliers

question

Which of the following is a benefit of adopting the euro?

answer

Correct The adoption of a common currency makes it easier to compare prices across Europe.

question

A key advantage of adopting the euro is that it:

answer

Correct lowers foreign exchange and hedging costs in Europe.

question

_____ refers to agreements among countries in a geographic region to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other.

answer

Correct Regional economic integration

question

The European Community became the European Union in 1993 following the ratification of the _____.

answer

Correct Maastricht Treaty

question

Which of the following is a factor that resulted in the establishment of the European Union (EU)?

answer

Correct The devastation of Western Europe during two world wars and the desire for a lasting peace

question

Which of the following is true of the provisions of the North American Free Trade Agreement?

answer

Correct It seeks the removal of most barriers on the cross-border flow of services.

question

Suppose the country of Ceria and Lithinia imposed tariffs on imports from all countries, and then they set up a free trade area, scrapping all trade barriers between themselves but maintaining tariffs on imports from the rest of the world. Now, Ceria begins to import sugar from Lithinia. However, Ceria had previously been importing sugar from another country, Cadnia, which produced sugar more cheaply than Ceria or Lithinia. This is known as _____.

answer

Correct trade diversion

question

Which of the following principles did the Single European Act propose to apply to product standards?

answer

Correct The principle of "mutual recognition"

question

Which of the following is true regarding the establishment of the euro?

answer

Correct By adopting the euro, the European Union has created the second most widely traded currency in the world after that of the U.S. dollar.

question

Which of the following supports the economic case for regional economic integration?

answer

Correct Coordination and policy harmonization problems are largely a function of the number of countries that seek agreement.

question

The right of foreign truckers to pick up and deliver goods within another member-state's borders is known as _____.

answer

Correct cabotage

question

Which of the following is true of the political case for regional economic integration?

answer

Correct Countries can enhance their political weight in the world by grouping their economies.

question

Which of the following is true about the European Parliament?

answer

Correct It is directly elected by the populations of the member-states.

question

Which of the following institutions has a monopoly in proposing European Union legislation?

answer

Correct European Commission

question

Which of the following is considered to be the ultimate controlling authority within the European Union?

answer

Correct European Council

question

Which of the following is true of Alexander Yeats' criticism of the Andean Pact?

answer

Correct He pointed out that Mercosur countries were insulated from outside competition by tariffs that run as high as 70 percent of value.

question

The _____ refers to a permanent bailout fund, worth about €500 billion, set up by the euro zone nations to restore confidence in the euro.

answer

Correct European Stability Mechanism

question

Which of the following is an example of concerns over national sovereignty acting as an impediment to regional economic integration?

answer

Correct Great Britain refusing to adopt the common currency of the European Union, the euro

question

Which of the following are significant trade blocs in Europe?

answer

Correct The European Union and the European Free Trade Association

question

Concerns about _____ arise because close economic integration demands that countries give up some degree of their control over such key policy issues as monetary policy, fiscal policy, and trade policy.

answer

Correct national sovereignty

question

The movement toward regional economic integration has been most successful in _____.

answer

Correct Europe

question

The Andean Community now operates as a _____.

answer

Correct customs union

question

Which of the following is true with regard to regional economic integration?

answer

Correct Regional economic integration is good for consumers because it lowers prices.

question

Which of the following is true of the theoretically ideal free trade area?

answer

Correct No discriminatory tariffs, quotas, subsidies, or administrative impediments are allowed to distort trade between members.

STUDY

Business Management European Free Trade Association Free Trade Area International Business

IB Chapter 9 – Flashcards 15 terms

Joseph Fraser

15 terms

Preview

IB Chapter 9 – Flashcards

question

A _____ has no barriers to trade among member-countries, includes a common external trade policy, and allows factors of production to move freely among members, but does not have a common currency.

answer

Common market

question

The ultimate controlling authority within European Union is the European Commission.

answer

false

question

Regional economic integration and the consequent increase in increased dependence on each other creates incentives for political cooperation between the neighboring states and reduces the potential for violent conflict.

answer

true

question

Which feature of an economic union differentiates if from a common market?

answer

Harmonization of tax rates of member-countries

question

Collectively, the member-states of the _____ account for about 55 percent of the world's GNP, 49 percent of world trade, and much of the growth in the world economy.

answer

The Asia-Pacific Economic Cooperation

question

Which of the following is an argument against economic integration?

answer

It reduces degree of control over certain issues such as monetary and fiscal policy.

question

In addition to NAFTA, the only other significant trade bloc in the Americas is Free Trade Area of the Americas (FTAA).

answer

true

question

Two countries, Cadmia and Palladia, have formed a free trade agreement. This has resulted in Cadmia importing sugar from Palladia which it previously did from another country at a lower cost. This agreement has led to:

answer

trade diversion.

question

The lowering of barriers to trade and investment among countries has led to decreased price competition throughout the EU and NAFTA.

answer

false

question

Which of the following trade pact collapsed due to a war?

answer

Central American Common Market

question

Free trade agreements are the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements.

answer

true

question

Which of the following is true with regard to NAFTA?

answer

Many observers credit NAFTA with helping to create the background for increased political stability in Mexico.

question

Which treaty committed EC members to adopting a common currency by January 1, 1999?

answer

The Maastricht Treaty

question

Which feature of a customs union differentiates it from a free trade area?

answer

Adoption of a common external trade policy

question

Identify the correct sequence of economic integration starting from the least integrated to the most integrated.

answer

Free trade area, Customs Union, Common Market, Economic Union, and Political Union.

STUDY

Countries Economics Free Trade Area International Economics Principles Of Marketing

3.4 Economic Integration – Flashcards 46 terms

James Storer

46 terms

Preview

3.4 Economic Integration – Flashcards

question

Economic integration

answer

Economic co-operation between countries and co-ordination of their economic policies.

question

Internal rules

answer

Rules that members follow for behaviour among themselves.

question

External rules

answer

Rules that members follow for behaviour with non-members.

question

Preferential trade agreement

answer

o Where members lower, but do not eliminate, barriers among themselves. o An agreement between two or more countries to lower trade barriers between each other on particular products. Trade barriers may remain on the rest of the products and on imports from non-member countries. o Dealings with non-members are not addressed so member countries maintain policies of their own choosing with regard to non-member countries. o Gives preferential access to certain products from certain countries by reducing or eliminating tariffs, or by other agreements relating to trade.

question

Free trade area

answer

Consists of a group of countries that agree to gradually eliminate trade barriers between themselves. In trade relations between members, there may be free trade in some products and some protection in other products. This is the most common type of trading bloc. Each member country retains the right to pursue its own trade policy towards other non-member countries. Members have the freedom to choose how they wish to deal with non-member countries. Example = NAFTA and ASEAN

question

Customs union

answer

Occurs where member countries not only eliminate internal trade barriers, but they also adopt common policies for dealings with any non-members. All the member countries of the customs union act as a group in all trade negotiations and agreements with non-members. Each country in a customs union is no longer free to determine its own trade policy towards non-member countries, but must adopt the policy agreed upon by the customs union.

question

Common market

answer

Members eliminate internal trade barriers, adopt common external trade barriers and allow free movement of resources among member countries. Resources are factors of production such as labour, or capital. Example = Mercosur

question

Economic union

answer

o Members eliminate internal barriers. o Members adopt common external barriers. o Members allow free movement of resources among member countries. o Members also adopt a uniform set of economic policies. Example = European Union and the Euro

question

Bilateral trade agreement

answer

An agreement between two countries.

question

Multilateral trade agreement

answer

Involves an agreement between many countries.

question

Regional trade agreement

answer

Involves agreements between a group of countries that are within a geographical region.

question

What is the main objective of trade agreements?

answer

The main objective of bilateral, regional and multilateral trade agreements is to promote trade liberalization.

question

What is trade liberalization?

answer

This is an increase in free trade achieved by the reduction or elimination of trade barriers between members.

question

Trade agreements reached under the WTO are regional, multilateral or bilateral? Why?

answer

Trade agreements reached under the World Trade Organization (WTO) are multilateral, because they include WTO member countries around the world. They require all member countries to reduce trade barriers at the same time.

question

One of the fundamental principles of the WTO is non-discrimination. What does this mean and what it its significance?

answer

o This means that a country cannot discriminate between any WTO members. o Countries cannot impose high barriers on imports from one member country and lower barriers on imports from another country. o This is a fundamental principle for the development of free trade globally.

question

What is a trading bloc?

answer

A trading bloc is a group of countries that have agreed to reduce tariffs and other barriers to trade amongst themselves for the purpose of encouraging free trade and co-operation between them.

question

From a lower to a higher level of economic integration there the following types of trading blocs:

answer

• Free trade area • Customs union • Common market

question

Economic integration over the long term can be expected to bring about many of the benefits of free trade, including:

answer

o Increased competition o Expansion into larger markets

question

What is a big problem that happens with free trade areas? Why does this problem arise? How is this problem solved?

answer

A product may be imported into the FTA by the country that has the lowest external trade barriers and then sold to countries within the FTA that have higher external barriers. This creates difficulties for the countries with higher trade barriers because they may end up importing more goods from countries outside the trade bloc than they would like. This problem arises because each country has its own individual barriers toward non-members. Because of this, FTA's generally make rules that prevent goods from entering countries with lower external barriers. These are sometimes known as country of origin rules. Summary: In order for an FTA to function properly, member countries must establish rules of origin for all third-party goods entering the free trade area. Goods produced within the free trade area may cross borders tariff-free, but rules of origin requirements must be met to prove that the good was in fact produced in the exporting country. In the absence of rules of origin, third-party countries seeking trade access to the FTA area will choose the path of least resistance in order to gain effective entry to the entire FTA region. This means that they will enter the FTA through the country where they face the lowest barriers to entry.

question

Why do customs unions have an advantage over free trade areas?

answer

Members of a customs union avoid having to create complicated internal rules for imports. This is because they all have the same common external barriers.

question

What is a problem with customs unions?

answer

Customs unions must co-ordinate their policies toward non-members and this gives rise to the possibility of disagreements. It might be difficult for all countries to agree on what are appropriate levels of trade barriers for non-members, especially if the level of development of the countries is different.

question

What are the main factors of production benefitted from being in a common market?

answer

The factors of production of importance are labour and capital. In a common market they are free to cross all borders so they can move, travel and find employment freely within the member countries. Workers are free to move and work in any member country without restrictions. Capital can also flow from country to country without restrictions.

question

What are the advantages of a common market over a customs union?

answer

Members enjoy free trade and all its advantages, such as: o Lower prices o Greater consumer choice = There is a greater variety of goods for consumers to choose from. Factor mobility across countries promotes a better use of factors of production. o There can be more specialization so there is an improved global allocation of resources. o For example, there may be high unemployment in a particular industry in one country and a high demand for labour in another country. This encourages unemployed workers to seek work in the country facing labour shortages. o If the profitability of investing is greater in one country than in another, capital gravitates to the more profitable country, making better use of capital resources. The principal advantage of establishing a common market is the expected gains in economic efficiency. o With unrestricted mobility, labour and capital can more easily respond to economic signals within the common market, resulting in a more efficient allocation of resources.

question

A common market requires the willingness of member governments to give up some of their policy-making authority to an organisation with powers over all the member governments. Is this easy? What are the consequences of this?

answer

This can be difficult to accomplish. It may take a long time for all countries to make the necessary policy changes to achieve co-ordination. For these reasons, there are far fewer common markets in the world than free trade areas and customs unions.

question

Economic integration will increase competition among producers within the trading bloc.

answer

With low or no barriers to trade, imports increase. This forces domestic producers to compete with lower cost producers from other countries. Trade barriers would have protected inefficient domestic producers, which does not promote a good global allocation of resources.

question

Increased competition offers major advantages in terms of:

answer

o Production by more efficient producers o Lower prices for consumers o Improved allocation of resources.

question

As the size of the market they supply expands, firms can achieve:

answer

o Lower costs of production on average, known as economies of scale. o Lower prices for consumers. o Greater export competitiveness.

question

Advantages of trading blocs:

answer

• Lower prices for consumers and greater consumer choice. • Increased investment. • Better use of factors of production/improved resource allocation. • Improved efficiency in production and greater economic growth. • Political advantages.

question

Disadvantages of trading blocs:

answer

• Trading blocs may not be the best way to achieve trade liberalization. • Trading blocs may create obstacles to the achievement of free trade on a global scale. • Unequal distribution of gains and possible losses in terms of the member countries. Countries forming a trading bloc are unlikely to gain equally from the operation of the trading bloc, creating the potential for conflicts between the member countries. This makes it difficult for agreements to be reached and means that some countries may actually lose from being in a trading bloc.

question

The IB syllabus refers specifically to trade creation and trade diversion as arising in customs unions. Is this necessarily true?

answer

No! They can arise in any type of trading bloc.

question

Trade creation:

answer

Trade creation refers to the situation where higher cost products (imported or domestically produced) are replaced by lower cost imports after the formation of a trading bloc.

question

Benefits of trade creation:

answer

Since trade creation involves the removal of tariffs, its benefits include getting rid of the disadvantages that come with imposing tariffs.

question

Trade diversion:

answer

Trade diversion refers to the situation where lower cost imports are replaced by higher cost imports from a member after the formation of a trading bloc. Trade diversion occurs when an importing country is forced to import from a higher cost producer within a trading bloc, whereas before it joined the trading bloc it was importing from a lower cost producer elsewhere.

question

The possibility of trade diversion resulting from a trading bloc is an additional argument against trading blocs and in favour of multilateral (WTO) trade liberalization. Why?

answer

The reason is that trade diversion cannot occur with multilateral reduction or elimination of trade barriers.

question

Does trade creation increase or decrease social welfare? What about trade diversion? What does this mean in terms of resource allocation?

answer

Trade creation has the effect of increasing social welfare, while trade diversion reduces it. Therefore, whereas a trading bloc creates free trade for the members, it may or may not improve the allocation of resources. Resource allocation will improve only if trade creation effects are larger than trade diversion effects.

question

Trade creation and trade diversion occur in the short-term or in the long-term?

answer

Trade creation and trade diversion refer to short-term (static) benefits and costs of trading blocs. This is because in the long-term the countries that are harmed by trade diversion can change their consumption patterns so that they will import less of the good in question.

question

Long-term benefits for the members of trading blocs are more important than short-term effects that may arise.

answer

Therefore, even if a trading bloc leads to trade diversion over the short term, it is possible that the long-term positive effects will more than compensate countries for possible short-term losses.

question

Different forms of economic integration allow member countries to gain from economies of scale.

answer

Economies of scale are one of the major benefits of free trade. In a small market, a firm cannot take advantage of economies of scale since a firm cannot grow large enough so that its long-run average costs begin to fall substantially. When an economy opens itself up to free trade with other countries, its exports are likely to increase, assuming that it is a relatively efficient producer.

question

Monetary union

answer

A common market with a common currency and a common central bank. Involves a far greater degree of integration than a common market.

question

What happens when countries decide to adopt a single common currency?

answer

In adopting a common currency, countries give up a significant part of their economic sovereignty to a supranational body. In terms of the European Union, the European Central Bank is responsible for the monetary policy for all the member countries. Following the adoption of a common currency, member countries give up control of their monetary supply and their ability to carry out their own monetary policy. These powers are transferred from each of their national central banks to a single institution (the European Central Bank in the case of the EU).

question

Advantages of a monetary union:

answer

• A single currency eliminates exchange rate risk and uncertainty, brining benefits to importers, exporters, consumers and investors. This encourages trade and investments across boundaries, contributing to achieving a more efficient allocation of resources. • A single currency eliminates transaction costs. Whenever there is a conversion of one currency into another, fees are charged for the conversion. A single currency eliminates these transaction costs, resulting in significant savings that have the effect of encouraging trade and investments. • A single currency encourages price transparency. This makes it easier for all economic decision-makers to see price differences quickly and accurately across countries, which has the effect of promoting competition and therefore of promoting more efficient production. • A single currency promotes a higher level of inward investment. This type of investment can be expected to rise because of the absence of currency risk, resulting in greater economic growth. • Low rates of inflation give rise to low interest rates, more investment and increased output. A single currency under the control of a single central bank committed to maintaining price stability results in low rates of inflation.

question

What is price transparency?

answer

Price transparency refers to the ability of consumers and firms to compare prices in all the countries that have adopted a common currency without having to make exchange rate calculations and conversions.

question

What is inward investment?

answer

Inward investment refers to investments from outsiders towards the member countries with a common currency.

question

What is the main problem with a monetary union?

answer

It is a system in which there is no possibility of changing the value of one currency in relation to another. There is no possibility of revaluing or devaluing the currency.

question

Disadvantages of a monetary union:

answer

• A single currency involves loss of exchange rates as a mechanism for adjustment. • A single currency involves loss of monetary policy as an instrument of economic policy. • Fiscal policy is constrained by the convergence requirements. • Monetary policy pursued by the single central bank impacts differently on each member country, depending on its own particular circumstances. Since countries are likely to differ from each other with respect to degrees of inflation and unemployment or their position in the business cycle, the single monetary policy pursued by the single central bank is unlikely to suit every country's needs. It may even harm some of the member countries, as is the case with the ECB not wanting to lower interest rates two years ago. This would have favored Greece but could have caused inflation in Germany so the interest rates were left the same.

question

What does not being able to change its exchange rate do to a country?

answer

If a member country has a trade deficit with another member country, it no longer has its own national currency that could depreciate (in a flexible exchange rate system) or devalue (in a fixed exchange rate system) to correct the imbalance.

STUDY

Business Law European Free Trade Association Free Trade Area Free Trade Association International Business Mergers And Acquisitions

MGT 302 Ch. 9 – Flashcards 84 terms

Marie Florence

84 terms

Preview

MGT 302 Ch. 9 – Flashcards

question

Regional economic integration involves agreements among countries in a geographic region to reduce, and ultimately remove, tariff and non tariff barriers to the free flow of goods, services, and factors of production between each other. TRUE or FALSE

answer

TRUE

question

The movement toward regional economic integration has been most successful in Asia. TRUE or FALSE

answer

FALSE

question

In a customs union, trade barriers are eliminated among member countries, and each country maintains its own external trade polices with nonmember countries. TRUE or FALSE

answer

FALSE

question

A common market has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members. TRUE or FALSE

answer

TRUE

question

A common market entails even closer economic integration and cooperation than an economic union. TRUE or FALSE

answer

FALSE

question

The European Union is an example of a perfect economic union. TRUE or FALSE

answer

FALSE

question

Coordination and policy harmonization problems are largely a function of the number of countries that seek agreement. TRUE or FALSE

answer

TRUE

question

Linking neighboring countries economically and making them interdependent creates incentives to increase political cooperation as well. TRUE or FALSE

answer

TRUE

question

Because of the fact that everyone benefits from economic integration, it is easy to achieve and sustain. TRUE or FALSE

answer

FALSE

question

A major impediment to economic integration is the loss of sovereignty it entails. TRUE or FALSE

answer

TRUE

question

Trade diversion occurs when higher-cost external producers are replaced by lower-cost external producers within the free trade area. TRUE or FALSE

answer

FALSE

question

In theory, WTO rules should ensure that a free trade agreement results in trade diversion. TRUE or FALSE

answer

FALSE

question

A regional free trade agreement will benefit the world only when the amount of trade it creates exceeds the amount of trade it diverts. TRUE or FALSE

answer

TRUE

question

There are two main trading blocs in Europe, the European Union and the European Free Trade Association. TRUE or FALSE

answer

TRUE

question

The Treaty of Rome, signed in 1957, established the European Free Trade Association. TRUE or FALSE

answer

FALSE

question

A central reason for the establishment of the EU was the devastation of Western Europe during two world wars and the desire for a lasting peace. TRUE or FALSE

answer

TRUE

question

The Council of the European Union is responsible for proposing EU legislation, implementing it, and monitoring compliance with EU laws by member states. TRUE or FALSE

answer

FALSE

question

The ultimate controlling unit within the EU is the European Council. TRUE or FALSE

answer

TRUE

question

The European Parliament is primarily a consultative rather than legislative body. TRUE or FALSE

answer

TRUE

question

The judges of the European Court of Justice are required to act as representatives of national interests, rather than as independent officials. TRUE or FALSE

answer

FALSE

question

The establishment of the euro required participating countries to give up their monetary policy. TRUE or FALSE

answer

TRUE

question

The Single European Act committed EU countries to adopting a common currency by January 1, 1999. TRUE or FALSE

answer

FALSE

question

Establishment of the euro created the largest currency zone in the world, replacing the position the U.S. dollar had held for decades. TRUE or FALSE

answer

FALSE

question

Great Britain, Sweden, and France have led the push toward adopting the euro. TRUE or FALSE

answer

FALSE

question

A key benefit resulting from the adoption of the euro is the ability to compare prices across member markets. TRUE or FALSE

answer

TRUE

question

The implied loss of national sovereignty to the ECB underlies the decision by Great Britain, Denmark, and Sweden to stay out of the euro zone for now. TRUE or FALSE

answer

TRUE

question

Since its establishment, the euro has had a stable trading history. TRUE or FALSE

answer

FALSE

question

On average, studies indicate that NAFTA's overall impact has been small but positive. TRUE or FALSE

answer

TRUE

question

The governments of both Canada and the United States are keen on adding other Latin American countries to NAFTA. TRUE or FALSE

answer

FALSE

question

The Andean Pact is a highly successful common market modeled after the EU. TRUE or FALSE

answer

FALSE

question

According to Alexander Yeats, the trade diversion effects of Mercosur outweigh its trade creation effects. TRUE or FALSE

answer

TRUE

question

The Free Trade Area of the Americas that was established in 2005 has thus far proven to be a success. TRUE or FALSE

answer

FALSE

question

The bulk of intra-ASEAN trade consisted of goods whose tariffs had been reduced through an ASEAN preferential trade arrangement. TRUE or FALSE

answer

TRUE

question

The Asia-Pacific Economic Cooperation was established to increase multinational cooperation in view of the economic rise of the Pacific nations and the growing interdependence within the region. TRUE or FALSE

answer

TRUE

question

Political turmoil in several African nations has persistently impeded any meaningful progress in economic integration. TRUE or FALSE

answer

TRUE

question

The East African Community (EAC) has been a successful integration effort in Africa during the last three decades. TRUE or FALSE

answer

FALSE

question

To exploit the opportunities presented by the EU, non-EU firms must establish EU subsidiaries. TRUE or FALSE

answer

TRUE

question

A benefit to companies of economic integration is the opportunity to centralize their production and reduce costs. TRUE or FALSE

answer

TRUE

question

Once barriers to trade and investment are removed, companies can treat a group of integrated countries like the EU as a single market and produce standardized products for it. TRUE or FALSE

answer

FALSE

question

The emerging role of the European Commission in competition policy suggests the EU is increasingly willing and able to intervene and impose conditions on companies proposing mergers and acquisitions. TRUE or FALSE

answer

TRUE

question

From least integrated to most integrated, the levels of economic integration are: A. a common market, a free trade area, an economic union, a customs union, and a political union. B. a free trade area, a customs union, a common market, an economic union, and a political union. C. a customs union, a free trade area, a common market, a political union, and an economic union. D. a common market, an economic union, a customs union, a free trade area, and a political union.

answer

B. a free trade area, a customs union, a common market, an economic union, and a political union.

question

Which level of economic integration eliminates trade barriers between member countries and adopts a common external trade policy? A. Political union B. Customs union C. Common market D. Economic union

answer

B. Customs union

question

Country X and Country Y reach an agreement to boost bilateral trade. They agree to remove all barriers to the trade of goods and services. They, however, are free to determine their own trade policies with regard to nonmembers. Which level of economic integration is this an example of? A. A customs union B. An economic union C. A common market D. A Free trade area

answer

D. A Free trade area

question

Which feature of a customs union differentiates it from a free trade area? A. Harmonization of members' tax rates B. A common currency C. A common external trade policy toward nonmembers D. Ability of factors of production to move freely between members

answer

C. A common external trade policy toward nonmembers

question

A _____ has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members. A. common market B. customs union C. free trade area D. bonded market

answer

A. common market

question

Three countries agree to remove barriers to trade between member countries and adopt a common external trade policy toward nonmembers. They also agree to allow people and other factors of production to move freely across their borders. Which level of economic integration is this an example of? A. Bonded market B. Customs union C. Free trade area D. Common market

answer

D. Common market

question

Which feature of a common market differentiates it from a customs union? A. Harmonization of members' tax rates B. A common currency C. A common external trade policy toward nonmembers D. Ability of factors of production to move freely between members

answer

D. Ability of factors of production to move freely between members

question

A(n) _____ involves the free flow of products and factors of production between member countries, the adoption of a common external trade policy, a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy. A. economic union B. common market C. customs union D. free trade area

answer

A. economic union

question

Which feature of an economic union differentiates it from a common market? A. Free flow of products and factors of production between member countries B. A common monetary and fiscal policy C. A common external trade policy toward nonmembers D. Ability of factors of production to move freely between members

answer

B. A common monetary and fiscal policy

question

Which of the following is a reason why the European Union is considered an imperfect economic union? A. Factors of production are not allowed to move freely between member countries. B. Not all members of the union have adopted the euro. C. Almost all markets are heavily regulated. D. Products and services are not allowed to move freely between member countries.

answer

B. Not all members of the union have adopted the euro.

question

The move toward economic union raises the issue of how to make a coordinating bureaucracy accountable to the citizens of member nations. Which of the following offers a solution to this problem? A. A common market B. A free trade area C. A customs union D. A political union

answer

D. A political union

question

What is the most enduring free trade area in the world? A. NAFTA B. EFTA C. ASEAN D. Mercosur

answer

B. EFTA

question

Why doesn't Great Britain use the euro as its national currency? A. Would have to convert its economic structure to the euro B. Would have to relinquish control of its monetary policy to the EU C. Would have to change its financial markets operations D. Would have to obtain approval from the U.S. Federal Reserve

answer

B. Would have to relinquish control of its monetary policy to the EU

question

A political benefit of economic integration is that: A. it enables participants to achieve gains from the free flow of trade. B. it enables participants to achieve gains from the free flow of investment. C. it allow countries to specialize in the production of goods and services that they can produce most efficiently. D. it reduces the potential for violent conflict.

answer

D. it reduces the potential for violent conflict.

question

Which of the following explains why economic integration has never been easy to achieve or sustain, despite the strong economic and political arguments in support? A. No country has shown significant improvement because of economic integration. B. Countries fear a reduction of their political weight in the world because of economic integration. C. Linking neighboring economies and making them increasingly dependent on each other creates little incentives for political cooperation. D. While a nation as a whole may benefit significantly, certain groups may lose.

answer

D. While a nation as a whole may benefit significantly, certain groups may lose.

question

_____ occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area. A. Trade deficit B. Trade diversion C. Trade creation D. Trade distortion

answer

C. Trade creation

question

Which of the following occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area? A. Efficiency gain B. Trade diversion C. Trade deficit D. Trade creation

answer

B. Trade diversion

question

Country A and Country B entered into a free trade agreement recently. After this, Country A starts importing heavy machinery from Country B. Country A used to previously import such machinery at lower rates from another country. Which of the following has occurred in this scenario? A. Trade creation B. Efficiency gain C. Trade deficit D. Trade diversion

answer

D. Trade diversion

question

To ensure that a free trade agreement does not result in trade diversion, which of the following has to come within the scope of WTO? A. Nontariff barriers B. Services C. Energy markets D. Tax rates

answer

A. Nontariff barriers

question

The European Community was established by: A. the Treaty of Rome signed in 1957. B. the Maastricht Treaty signed in 1991. C. the Maastricht Treaty of 1994. D. the Single European Act of 1987.

answer

A. the Treaty of Rome signed in 1957.

question

The _____ is responsible for proposing EU legislation, implementing it, and monitoring compliance with EU laws by member states. A. European Parliament B. European Commission C. Council of the European Union D. Court of Justice

answer

B. European Commission

question

Why is the European Council said to be the ultimate controlling authority within the EU? A. Since it is responsible for implementing EU legislation and monitoring compliance with EU laws by member states B. Since its role in setting competition policy is becoming increasingly important to business C. Since it has the right to vote on the appointment of commissioners D. Since draft legislation from the commission can become EU law only if the council agrees

answer

D. Since draft legislation from the commission can become EU law only if the council agrees

question

Which of the following is directly elected by the populations of the member states and is primarily a consultative rather than legislative body? A. The European Parliament B. The European Commission C. The Council of the European Union D. The Court of Justice

answer

A. The European Parliament

question

Which of the following was the outcome of the Treaty of Lisbon signed in 2007? A. It established the European Community. B. It resulted in the adoption of the Euro. C. It changed the name of the European Community to the European Union. D. It increased the power of the European Parliament.

answer

D. It increased the power of the European Parliament.

question

Which of the following observations pertaining to the EU's Court of Justice is incorrect? A. It is comprised of one judge from each country. B. It is the supreme appeals court for EU law. C. Its judges are required to act as representatives of national interests. D. A member country can bring other members to the court for failing to meet EU treaty obligations.

answer

C. Its judges are required to act as representatives of national interests.

question

Which of the following observations is not true of the euro? A. It is used by all member states of the European Union. B. It required participating countries to give up their own currencies. C. It required participating countries to give up control over monetary policy. D. By adopting it, the EU created the second most widely traded currency in the world.

answer

A. It is used by all member states of the European Union.

question

Which treaty, signed in December 1991, committed EC members to adopting a common currency by January 1, 1999? A. The Maastricht Treaty B. The Treaty of Rome C. The Single European Act D. The Treaty of Lisbon

answer

A. The Maastricht Treaty

question

Which of the following is seen as a benefit of the euro? A. Governments gaining greater control over their monetary policies B. Reduced competition in most industries C. Zero interest expense for businesses D. Lower foreign exchange and hedging costs

answer

D. Lower foreign exchange and hedging costs

question

Which of the following is seen as a disadvantage of the euro? A. Higher foreign exchange and hedging costs B. National authorities losing control over monetary policy C. It becomes difficult to compare prices across Europe D. It undermines the development of a pan-European capital market

answer

B. National authorities losing control over monetary policy

question

In a(n) ____, similarities in the underlying structure of economic activity make it feasible to adopt a single currency and use a single exchange rate as an instrument of macroeconomic policy. A. optimal currency area B. unified economic area C. uniform currency zone D. monetary zone

answer

A. optimal currency area

question

Which of the following was required for new applicants to qualify for EU membership? A. Minimum economy size of €1 trillion B. Nationalization of private assets C. Deregulation of markets D. Sustained GDP growth of 10 percent for five years

answer

C. Deregulation of markets

question

Which of the following is seen to be a consequence of the size of the EU from 15 nations to 27 nations? A. Delays in the decision-making processes B. Elimination of the sovereign debt crisis C. Euro becoming the most traded currency in the world D. Huge initial impact on the overall economic welfare

answer

A. Delays in the decision-making processes

question

Which of the following is a reason why Turkey is not yet a member of the EU? A. Because only about 10 percent of Turkey's international trade is with the EU. B. Because of concerns over human rights issues in the country. C. Because the country has yet to form a customs union with the EU. D. Because of Turkey's weak economy.

answer

B. Because of concerns over human rights issues in the country.

question

How does the NAFTA seem to increase the international competitiveness of U.S. and Canadian firms? A. It gives them access to scarce natural resource hitherto unavailable. B. It increases tariff barriers making the North American market less attractive to Asian companies. C. It allows them to take advantage of lower labor costs in Mexico. D. It gives them production bases in South American markets like Brazil and Argentina.

answer

C. It allows them to take advantage of lower labor costs in Mexico.

question

What was the main objection raised by those in the United States and Canada who opposed the ratification of the NAFTA? A. Job losses B. Balance of payment problems C. Threat of competition from Asian companies D. Threat of a loss of national sovereignty

answer

A. Job losses

question

Bolivia, Peru, Ecuador, Columbia, and Venezuela are all members of: A. Mercosur. B. NAFTA. C. APEC. D. the Andean Pact.

answer

D. the Andean Pact.

question

Mercosur originated as a(n) _____ between Brazil and Argentina in 1988. A. common market B. free trade pact C. customs union D. economic union

answer

B. free trade pact

question

According to Alexander Yeats: A. the trade diversion effects of Mercosur outweigh its trade creation effects. B. the fastest growing items in intra-Mercosur trade were capital-intensive goods produced efficiently in the member countries. C. Mercosur countries will be able to compete globally once the group's external trade barriers come down. D. the customs union is becoming more perfect over time.

answer

A. the trade diversion effects of Mercosur outweigh its trade creation effects.

question

In early 2006, six CARICOM members and the United States established the ____, which was modeled on the EU's single market. A. Central American Common Market B. Central America Free Trade Agreement C. Caribbean Single Market and Economy D. North American Free Trade Area

answer

C. Caribbean Single Market and Economy

question

What has been the most significant impact of NAFTA? A. Its economic effects B. Its political effects C. Its psychological effects D. Its social effects

answer

B. Its political effects

question

Which of the following is true of ASEAN? A. China, India, South Korea, and Singapore are among its members. B. Collectively, the member states account for about 55 percent of world trade. C. It is slowly progressing toward establishing a free trade zone. D. It has been successful in fulfilling its basic objective of fostering freer trade between member countries.

answer

C. It is slowly progressing toward establishing a free trade zone.

question

Which of the following accounts for about 55 percent of the world's GNP and 49 percent of world trade? A. NAFTA B. APEC C. ASEAN D. EFTA

answer

B. APEC

question

Which of the following is the most frequently aired objection to free trade in Africa? A. These economies are too small for free trade to exist. B. These countries are not ready for a full-fledged political union with a common currency. C. They need to be "protected" by tariff barriers from unfair foreign competition. D. The larger nations like South Africa and Kenya stand much to lose from free trade and competition.

answer

C. They need to be "protected" by tariff barriers from unfair foreign competition.

question

The lowering of barriers to trade and investment between countries is likely to lead to _____ throughout the EU. A. higher costs of borrowing B. increase prices C. increase in hedging costs D. increased price competition

answer

D. increased price competition

STUDY

Advertising And Marketing Free Trade Area Regional Economic Integration

BUSA 3000 Chapter 9 – Flashcards 50 terms

Mary Browning

50 terms

Preview

BUSA 3000 Chapter 9 – Flashcards

question

REGIONAL INTEGRATION AND ECONOMIC BLOCS 1. National economic integration refers to the economic interdependence experienced by closely associated countries that have formed an alliance.

answer

False p. 228

question

2. The European Union, formerly the European Economic Community, is the world's oldest, largest, and most advanced economic bloc.

answer

True p. 229

question

TYPES OF REGIONAL INTEGRATION 3. Countries in free trade areas only import and export products and services within the regional economic bloc.

answer

False p. 229

question

4. An exporter from Canada would face the same tariff if importing into either Argentina or Brazil.

answer

True p. 229

question

5. In economic unions, member countries often adopt standardized tax rates and exchange rates.

answer

True p. 230

question

LEADING ECONOMIC BLOCS 6. Belgium, France, Germany, Italy, and Spain signed the Treaty of Rome in 1957, which eventually led to the establishment of the EU.

answer

False p.

question

7. The introduction of the euro in 2002 meant that the monetary power of national governments within the EU was taken over by the European Central Bank.

answer

True p.234 - p.235

question

8. Western European members of the EU are expanding their economies at a rate twice as fast as Eastern European members due to the collapse of communism.

answer

False p. 236

question

WHY COUNTRIES PURSUE REGIONAL INTEGRATION 9. Regional integration enables firms to efficiently utilize labor and resources, which ultimately leads to competitive product pricing

answer

True. p

question

10. Foreign firms typically prefer investing in nations that are not part of economic blocs because of the additional regulations and restrictions.

answer

False

question

SUCCESS FACTORS FOR REGIONAL INTEGRATION 11. The most notable characteristic of economic blocs is that the member countries generally share a similar language and culture.

answer

False. Economic Similarity p. 242

question

12. Canadian companies enjoy more trade and investment relationships with U. S. firms than with Mexican firms because of language barriers between Canada and Mexico.

answer

True. p. 243

question

DRAWBACKS AND ETHICAL DILEMMAS OF REGIONAL INTEGRATION 13. The term trade creation refers to trade generated between nations of different economic blocs.

answer

False. Means Trade is generated among the countries inside the economic bloc because, as barriers fall, each member country tends to begin trading more with members than with nonmembers. p.243

question

14. Countries which join economic blocs must sacrifice control of their own economic destiny by submitting to the laws and regulations of the bloc's central authority.

answer

True p.

question

15. Rationalization after regional integration reduces redundancy in a firm by lowering costs and improving the efficiency of company operations.

answer

True

question

REGIONAL INTEGRATION AND ECONOMIC BLOCS 16. The intended purpose of regional integration is to ________. a. increase the mobility of workers among the member countries in a bloc b. reduce trade and investment barriers within the bloc c. streamline customs agency regulations within the bloc d. encourage foreign investment into the bloc

answer

b. reduce trade and investment barriers within the bloc p.

question

17. Which of the following terms is used to refer to two or more geographically connected nations in pursuit of freer trade relations? a. trade organization b. economic union c. economic bloc d. free trade agreement

answer

c. economic bloc

question

18. Which of the following organizations exemplifies regional integration?

answer

a. EU

question

19. Which of the following is favored by the World Trade Organization?

answer

d. multilateral trading system

question

TYPES OF REGIONAL INTEGRATION 20. The common market is categorized as which of the following levels of regional integration? a. free trade area b. free trade area and common external tariffs c. free trade area, common external tariffs and free movement of production factors d. free trade area, common external tariffs, free movement of production factors, and unified fiscal and monetary policies

answer

c. free trade area, common external tariffs and free movement of production factors

question

21. Members of ________ agree to the tariffs and non-tariff barriers that are applied to imports from nonmember countries. a. free trade areas b. customs unions c. economic blocs d. regional alliances

answer

b. customs unions

question

22. All of the following nations are members of MERCOSUR except ________. a. Paraguay b. Uruguay c. Mexico d. Argentina

answer

c. Mexico

question

23. Which of the following is the way in which common markets differ from customs unions? a. Products, services, and factors of production are allowed to move freely between member countries. b. Tariffs and non-tariff trade barriers are eliminated when trade and business investments occur between member nations. c. Member nations share a regulated system of tariff rates and equally distribute tax revenue received from non-member countries. d. The monetary, tax, and fiscal policies of member nations are overseen by a central authority.

answer

a. Products, services, and factors of production are allowed to move freely between member countries.

question

24. A firm's freedom to transfer funds to subsidiaries within a bloc characterizes which of the following levels of regional integration? a. customs union b. common market c. free trade area d. all of the above

answer

b. common market

question

25. At least some EU countries have established all of the following levels of regional integration except ________.

answer

d. political union

question

26. Economic unions are characterized by all of the following except ________. a. reduced border controls b. consistent labeling standards c. shared government institutions d. standardized merger laws

answer

c. shared government institutions

question

LEADING ECONOMIC BLOCS 27. Switzerland is a member of which of the following economic blocs? a. EU b. EFTA c. CAN d. APEC

answer

b. EFTA

question

28. Which of the following has the longest experience with regional integration? a. the Americas b. Asia c. Europe d. the Middle East

answer

c. Europe

question

29. Which of the following is responsible for determining the admission of new member countries to the EU? a. Council of the European Union b. European Parliament c. European Court of Justice d. European Commission

answer

a. Council of the European Union

question

30. The two EU institutions that oversee banking and legal issues are based in which of the following cities? a. Brussels b. Strasbourg c. London d. Luxembourg

answer

d. Luxembourg

question

31. Which of the following industries has experienced rapid expansion in Eastern Europe?

answer

c. automobile

question

32. What is the most likely reason that some Western European countries are concerned about the addition of Eastern European countries to the EU? a. fear of draining EU funds and outgrowing the current infrastructure b. concern about losing employment opportunities and foreign investment c. lack of public roads and transportation systems needed for manufacturing d. inability to provide necessary training and education to poor nations

answer

b. concern about losing employment opportunities and foreign investment

question

33. Countries such as Poland and Hungary have most likely attracted business investment because of ________. a. low wages b. uncomplicated business regulations c. inexpensive land d. few restrictions

answer

a. low wages

question

34. Which of the following has occurred as a result of NAFTA? a. Workers at maquiladoras have instigated union strikes. b. Working conditions in member nations have improved. c. Canadian exports to Europe and Asia have doubled. d. Foreign investors have been replaced by U.S. firms.

answer

b. Working conditions in member nations have improved.

question

35. Associate members of MERCOSUR enjoy which of the following benefits? a. legal waivers b. low cost labor c. preferential trade d. tariff exemption

answer

c. preferential trade

question

36. Which of the following economic blocs will most likely merge with MERCOSUR? a. CER b. NAFTA c. CARICOM d. CAN

answer

d. CAN

question

37. Which of the following members of ASEAN trades more products than it manufactures? a. Singapore b. Malaysia c. Philippines d. Indonesia

answer

a. Singapore

question

38. Which of the following is the primary reason for the lack of success seen by APEC? a. lack of strong industrial nations b. disagreement on economic issues c. language and cultural differences d. insufficient geographical proximity

answer

b. disagreement on economic issues

question

39. Member nations of CER seek to reduce trade dependence on which of the following countries? a. Australia b. Asia c. United States d. Great Britain

answer

d. Great Britain

question

40. All of the following most likely explain the lack of success by economic blocs in Africa except ________. a. tariff restrictions b. political unrest c. infectious diseases d. corruption

answer

a. tariff restrictions

question

WHY COUNTRIES PURSUE REGIONAL INTEGRATION 41. All of the following characterize benefits of regional integration to firms except ________. a. free-trade access within an economic bloc b. widened access to other economic blocs c. increased efficiency in production and marketing d. expanded marketplace for goods and services

answer

b. widened access to other economic blocs

question

42. One of the reasons for the establishment of the European Community was to ________. a. broaden the power of communism within East Germany b. create fair standards of trade and international business c. combine forces against the powerful former Soviet Union d. establish judicial procedures to handle trade violators

answer

c. combine forces against the powerful former Soviet Union

question

SUCCESS FACTORS FOR REGIONAL INTEGRATION 43. The success of which of the following blocs was most dependent on a shared language and culture? a. NAFTA b. MERCOSUR c. EU d. EFTA

answer

b. MERCOSUR

question

44. Which of the following factors has affected Sweden's success in the EU? a. high unemployment b. infrastructure c. cultural issues d. tax policies

answer

d. tax policies

question

DRAWBACKS AND ETHICAL DILEMMAS OF REGIONAL INTEGRATION 45. Which of the following terms is used to refer to a nation in an economic bloc ceasing to trade with a non-member nation? a. trade diversion b. trade creation c. trade autonomy d. free trade

answer

a. trade diversion

question

46. Canada restricts U.S. film and television producers from investing in the Canadian film market in order to ________. a. protect the Canadian film culture b. safeguard the Canadian economy c. ensure national film autonomy d. guard the integrity of Canadian actors

answer

a. protect the Canadian film culture

question

47. Regional integration often forces firms to restructure which may lead to ________. a. trade diversion b. trade creation c. reduced global trade d. worker layoffs

answer

d. worker layoffs

question

48. Firms often internationalize within an economic bloc for all of the following reasons except ________. a. gain international experience b. generate new sales and profits c. reduce exposure to competition d. increase source of supplies

answer

c. reduce exposure to competition

question

49. Many European firms gain access to the NAFTA bloc by ________. a. exporting their manufactured goods into Canada b. investing in the creation of Mexican factories c. advertising and marketing through U.S. media d. establishing political connections through U.S. firms

answer

b. investing in the creation of Mexican factories

question

50. Airbus Industries, the aircraft manufacturer, exemplifies which of the following opportunities created by regional integration? a. joint venture b. collaborative venture c. free trade agreement d. intercontinental bloc

answer

b. collaborative venture

STUDY

East And South Economic Activity Free Trade Area Northern European Plain Traits World Geography

Europe’s Land Regions – Flashcards 18 terms

Brandon Ruffin

18 terms

Preview

Europe’s Land Regions – Flashcards

question

Western Uplands

answer

Scandinavian Peninsula, Scotland, Ireland, Iceland, Portugal, and Spain

question

Northern European Plain

answer

England, Northern France, Northern Germany, and Southeastern Europe

question

Central Uplands

answer

Eastern Europe, Luxembourg, southern Germany

question

Alpine Mountain Region

answer

Mountains of Spain, Switzerland, Italy, Greece, and Southeastern Europe

question

Alpine Mountain Region

answer

Mountains dominate this region

question

Western Uplands

answer

Rugged highlands as the result of glaciers

question

Northern European Plain

answer

Rivers are plentiful

question

Western Uplands

answer

Poor soil

question

Northern European Plain

answer

Most populated

question

Central Uplands

answer

Hills and forests

question

Western Uplands

answer

Lakes and marshlands

question

Northern European Plain

answer

Soil ideal for farming

question

Western Uplands

answer

Coldest Region

question

Northern European Plain

answer

Land is mostly flat

question

Western Uplands

answer

Livestock, hydroelectric power

question

Northern European Plain

answer

Farming, trade

question

Central Uplands

answer

Livestock, farming

question

Alpine Mountain Region

answer

Olive groves, vineyards, and orchards

STUDY

Business Management Carbon Dioxide Emissions Encoding And Decoding Free Trade Area International Business International Marketing

Global Business Test 1 Multiple Choice – Flashcards 80 terms

Elizabeth Hill

80 terms

Preview

Global Business Test 1 Multiple Choice – Flashcards

question

When museums and monuments are built in order to preserve legacies of important events or people, it promotes which of the following? a. Cultural diffusion b. Caste system c. National culture d. Social mobility

answer

c. National culture

question

The United Kingdom and United states value ______, whereas Japan and South Korea value ________. a. caste system; class system b. aesthetics; ethnocentricity c. individual freedom; group consensus d. quality of life; quantity of life

answer

c. indivual freedom; group consensus

question

People from which of these cultures are casual about time and maintain flexible schedules? a. Japan b. The United States c. Northern Europe d. Latin America

answer

d. Latin America

question

Bowing to show respect in Japan is an example of which of these cultural traits? a. Tradition b. Concept c. Gesture d. Material object

answer

c. Gesture

question

Which of the following describes a behavior, often dating back several generations, that is practiced within a homogenous group of people? a. Manners b. Attitude c. Popular custom d. Folk custom

answer

d. Folk custom

question

A ___________ is a system of social stratification in which people are born into a social ranking, with no opportunity for social mobility. a. moksha b. class system c. caste system d. kosher

answer

c. caste system

question

Which of these religions is the world's single largest religion? a. Jewish b. Christianity c. Islamic d. Confucianism

answer

b. Christianity

question

Which of these, according to Hofstede, describes the degree of inequality between people in different occupations? a. Power distance b. Uncertainty avoidance c. Individualism d. Collectivism

answer

a. Power distance

question

An autocratic style of management would be best received by which of the following situations? a. Low power-distance countries b. High power-distance countries c. Uncertainty avoiding countries d. Countries with high individualism

answer

b. High power-distance countries

question

An agreement in which one company provides a foreign company with a complete package of materials and service including advice and standardized operating procedures is called? a. outsourcing. b. licensing. c. direct investment. d. franchising.

answer

d. franchising.

question

Which of the following is an example of paralanguage? a. Widening your eyes b. Moving closer to the listener c. Speaking faster d. Touching while you speak

answer

c. Speaking faster

question

An arrangement in international business in which two companies, a foreign company and a local firm, invest together to create a local business is called a. joint venture. b. local assembly. c. indirect exporting. d. licensing.

answer

a. joint venture.

question

Two carmaker have developed a strange, but successful partnership. Ford, a U.S. automaker, and Mazda, an Asian carmaker, have collaborated on several models including the Explorer, the Probe, the Mazda 323, and the MX-6. The U.S. automaker has supplied Mazda with help in marketing, finance, and styling. In return, Mazda has provided manufacturing and product development expertise with Ford. Both companies have worked together toward a common goal and both have benefited as a result of their ______. a. international savvy b. international competitive expertise c. strategic alliance d. knowledge of global competition

answer

c. strategic alliance

question

Which of the following is not an advantage of licensing? a. Capital-free entry b. Low risk c. Can obtain information about the dynamics of the market d. Increased employment in the company licensing its brand or technology

answer

d. Increased employment in the company licensing its brand or technology

question

Companies which contract with a foreign firm to make products according to stated specifications are using a. direct exporting. b. indirect exporting. c. licensing. d. local manufacturing.

answer

d. local manufacturing.

question

As a firm exporting to direct investment, the relative amount of a firm's financial commitment, risk, and profit potential a. increases. b. decreases. c. remains the same. d. the risks decrease and potential for profit increases.

answer

a. increases.

question

The practice of international management is best approached from which of the following perspectives? a. historical b. Human relations c. Contingency d. Systems approach

answer

c. Contingency

question

The rules of the game for the international manager are set by a. multinational corporations. b. international trade associations. c. international political associations. d. individual countries and cultures.

answer

d. individual countries and cultures.

question

What is perhaps the most likely reason why McDonald's has expanded internationally? a. Cut costs b. find new sources of financing c. Overcome limited expansion opportunities at home d. Establish economies of scale.

answer

c. Overcome limited expansion opportunities at home

question

The entry strategy of _________ provides the least amount of risk and resource costs, but also the least control. a. exporting b. licensing c. franchising d. a joint venture

answer

a. exporting

question

An MNC that is host-country oriented is called a. ethnocentric. b. polycentric. c. geocentric. d. localcentric.

answer

b. polycentric.

question

The emergence of a largely borderless economic world has created a _______ for markets of all shapes and sizes. a. condition of chaos b. terrible business climate c. paradigm shift d. new reality

answer

d. new reality

question

A manager in Japan should realize that Japanese are motivated a. by time off. b. in groups. c. by money only. d. by public praise only.

answer

b. in groups.

question

A key to successfully implementing a "push" promotion strategy abroad is a. to create a brand loyal consumer b. a company's sales force. c. creating consumer demand through mass-media advertising. d. all of the above.

answer

b. a company's international sales force.

question

Which of the following best describes the global economy? a. Trade b. Diversity c. Interdependency d. Multinational corporation

answer

c. Interdependency

question

_____ are imitation products passed off as legitimate trademarks, patents, or copyrighted works. a. Brand name goos b. Counterfeit goods c. Foreign goods d. Intangible goods

answer

b. Counterfeit goods

question

The TRIAD market consists of which regions? a. Western Europe, Eastern Europe, and North America b. Western Europe, Asia, and the United States c. Western Europe, Asia, and North America d. Europe, Southeast Asia, and the Americas

answer

c. Western Europe, Asia, and North America

question

The risk of expropriation is highest in countries that a. have a large number of MNC's operating. b. experience continuous political upheaval. c. have low levels of education and economic development. d. have unstable economies.

answer

b. experience continuous political upheaval.

question

All of the following are examples of domestic economic conditions except a. size of population. b. economic growth over the last five years. c. availability of energy resources. d. legal protection of brands.

answer

d. legal protection of brands.

question

A country's ability or intention to meet its financial obligations determines its a. economic risk. b. political risk. c. expropriation risk. d. appropriability risk.

answer

a. economic risk.

question

Which of these is essential to production in any country? a. Availability of labor b. Tariffs and quotas c. Governmental control d. Local financing

answer

a. Availability of labor

question

Governmental regulation and government bureaucracy are important factors evaluated in which of these steps of the market / site screening process? a. Identify basic appeal b. Measure market / site potential c. Assess the infrastructure d. Assess the national business environment

answer

d. Assess the national business environment

question

Tariff serve primarily to a. encourage foreign trade. b. equalize production capacity. c. raise prices on imports. d. limit the amount of goods leaving the domestic market.

answer

c. raise prices on imports.

question

Limits placed on foreign producers which guarantee that approximately 50 percent of the U.S. sugar market be reserved for American sugar growers is an example of a. tariffs. b. blocked currency. c. quotas. d. excise taxes.

answer

c. quotas.

question

The use of the Internet raises difficult questions about a. ownership of intellectual property. b. taxation. c. residence location. d. all of the above.

answer

d. all of the above.

question

Which of these is the main political motive behind government intervention in trade? a. Promotion of a strategic trade policy b. Protecting jobs c. Protection of national identity d. Protecting young industries from competition

answer

b. Protecting jobs

question

Which of these industries is typically protected for national security reasons? a. Agriculture b. Textile c. Cosmetic d. Housing

answer

a. Agriculture

question

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. a. transit b. domestic c. export d. import

answer

a. transit

question

A ban on trade in one or more products with a particular country is called a(n) a. embargo. b. tariff-quota. c. tariff. d. export restraint.

answer

a. embargo.

question

Fluctuations in _______ among the world's currencies are of critical importance in global marketing. a. immigration b. reciprocity c. exchange rates d. equity

answer

c. exchange rates

question

If a U.S. dollar had been worth 2 German marks in 1999 and 4 German marks in 2000, then American goods would have been _______ expensive in Germany in 1999 than in 2000. a. more b. less c. equally as d. cannot be determined with the information given

answer

b. less

question

Personnel directors typically select potential expatriates on the basis of a. their ability to speak more than one language. b. their ability to adapt to different cultures. c. their desire to learn another culture. d. their domestic track record and technical expertise

answer

d. their domestic track record and technical expertise

question

Managers prefer that exchange rates be a. stable. b. freely floated. c. volatile. d. unpredictable.

answer

a. stable.

question

Which is the final stage of the culture shock process? a. Gradual adjustment b. The honeymoon stage c. Biculturalism d. Irritation and hostility

answer

c. Biculturalism

question

When a country has a weak currency relative to other nations, it makes imports ___________ relative to domestic products. a. more expensive b. equitable in price c. more attractive d. less expensive

answer

a. more expensive

question

All of the following a barriers to a global staffing policy, except a. staff availability. b. corporate strategy. c. cost constraints. d. host government requirements.

answer

b. corporate strategy.

question

Among older Japanese women, a management position a. was a great honor. b. caused her husband loss of face. c. was common for college educated women. d. All of the above

answer

b. caused her husband loss of face.

question

What is the term for a firm selling a product in a foreign country below its domestic price or below its actual cost? a. Competition b. Monopolistic practice c. Globalization d. Dumping

answer

d. Dumping

question

European nations are most likely to use which type of law? a. Common b. International c. Statutory d. Civil

answer

d. Civil

question

Under what form of law are past court decisions used as precedents? a. Religious law b. Civil law c. Common law d. Statutory law

answer

c. Common law

question

The modern Western system of _________ is technically illegal in Moslem nations.` a. steel b. consumer products c. textiles d. banking

answer

d. banking

question

Seizure of assets falls into all of these categories except a. confiscation. b. local content requirements. c. expropriation. d. nationalization.

answer

b. local content requirements.

question

Which of these is the policy of hiring people to represent a company's views on political manners? a. Partnership b. Lobbying c. Bilateral agreement d. Localization

answer

b. Lobbying

question

The Foreign Corrupt Practices Act forbids U.S. companies from ____________ government officials or political candidates in other nations. a. lobbying b. politically influencing c. bribing d. contacting

answer

c. bribing

question

A ____________ is a right granted to the inventor of a product or process that excludes others from making, using, or selling the invention. a. patent b. trademark c. civil right d. copyright

answer

a. patent

question

The Nike "Swoosh" is a a. patent. b. fad. c. copyright. d. trademark.

answer

d. trademark.

question

The main of privatization is to a. lower the responsibility and accountability. b. increase economic efficiency. c. increase subsidiaries to companies. d. slow the economic growth.

answer

b. increase economic efficiency

question

In 1999, the U.S. government brought charges against Microsoft for which of these? a. To enforce antitrust laws b. For having too much money c. To reduce competition d. For laying off too many people

answer

a. To enforce antitrust laws

question

When one company is able to control a product's supply-and therefore its price-it is considered a(n) a. government-owned company. b. monopoly. c. underground-controlled company. d. supply-driven company.

answer

b. monopoly.

question

In a countertrade exchange, PepsiCo trades soft drink concentrate with Russia for a. exclusive rights to future Pizza Hut and Taco Bell franchises. b. information of MIA's from the war in Vietnam. c. Stolichnaya Vodka. d. Beluga Caviar.

answer

c. Stolichnaya Vodka.

question

A process that involves the study of similarities and differences among consumers in two or more nations or societies a. international attitude evaluation. b. multigraphic societal scanning. c. polyphasic anthropology d. cross-cultural analysis

answer

d. cross-cultural analysis

question

The reverence that Japan shows towards its elderly is an example of the nation's a. values. b. beliefs c. customs. d. religion.

answer

a. values.

question

The number 13 is considered "unlucky" in America whereas the number 4 is considered "unlucky" in Japan. This is an example of differences in a. cultural symbols. b. values. c. ethics. d. morals.

answer

a. cultural symbols.

question

If you were responsible for marketing communications a Paper Mate, the pen manufacturing company, and had to provide product literature to distributed in France, you would be wise use what is called "___________", whereby you have your literature translated from American English into French, and then from French into American English by someone in France. a. back talk b. back translation c. double talk d. double indemnity

answer

b. back translation

question

Since global marketing is affected by economic consideration, a scan of the global marketing should include a. a comparative analysis of the economic development in different countries. b.an assessment of the economic infrastructure in the countries. c. consumer income in different countries. d. all of the above.

answer

d. all of the above.

question

Wrigley's Gun distributes its products in identical form in all the countries in which it markets. This is an example of which type of international marketing strategy? a. Extension b. Customized c. Adaptation d. Invention

answer

a. Extension

question

The majority of the total world merchandise trade occurs a. between high-income countries and low- and middle-income nations. b. among world's high-income economies. c. among low- and middle-income nations. d. among the emerging markets.

answer

b. among world's high-income economies.

question

An institution that sets rules governing trade between its members through a panel of trade experts who decide on trade disputes between members and issue binding decisions is the a. World Health Organization. b. World Trade Organization. c. International Cooperation Organization. d. League of Nations.

answer

b. World Trade Organization.

question

Just as countries and regions can discourage international trade through trade barriers, they can also encourage it through offering ______, helping on site location, and providing other services. a. lavish parties and entertainment b. bribes placed in numbered Swiss bank accounts c. prison labor d. investment incentives

answer

d. investment incentives

question

Hungary has offered a five-year "tax holiday"-a period during which no corporate taxes will be assessed-to encourage foreign firms to develop manufacturing facilities there. What is the term for this in international business. a. Global cooperation b. Trade incentive c. Bribery d. Countertrade

answer

b. Trade incentive

question

When a country is not able to produce a good more efficiently than another, but produces the good more efficiently than any other goods, it is said to have a(n) a. absolute advantage. b. resource problem. c. zero-sum game. d. comparative advantage.

answer

d. comparative advantage.

question

Which of these is not a problem associated with the infant industry argument? a. It can cause domestic companies to become overly innovative. b. Once protection of an industry is given, it can be politically difficult to eliminate it. c. Protection can do more economic harm than good. d. Governments are required to distinguish between industries that are worth protecting and those that are not.

answer

a. It can cause domestic companies to become overly innovative.

question

The Uruguay Round of negotiations modified the original GATT treaty in all of the following way except a. intellectual property rights were clearly defined. b. the WTO was established to enforce the new GATT. c. tariffs and nontariff barriers in trade in telecommunications were reduced significantly. d. international trade in services was included in the GATT for the first time.

answer

c. tariffs and nontariff barriers in trade in telecommunications were reduced significantly.

question

A key component of the WTO that was carried over from the GATT is the principle of non-discrimination called a. normal trade relation. b. equality of all nations. c. equity exchange. d. fairness principle.

answer

a. normal trade relation.

question

Which form of entry into a foreign market requires the greatest commitment? a. Direct exporting b. Direct investment c. Joint venture d. Licensing

answer

b. Direct investment

question

The world's three most important financial centers are a. Bonn, Zurich, and New York. b. London, Amsterdam, and Sydney. c. New York, Tokyo, and Bombay. d. Tokyo, London, and New York.

answer

d. Tokyo, London, and New York.

question

Which of these is the market consisting of all stocks bought and sold outside the issuer's home country? a. The Eurocurrency market b. The international equity market c. The foreign exchange market d. The international bond market

answer

b. The international equity market

question

When goods are stored in a commercial warehousing facility the parties to the contract have entered into what type of agreement? a. A bailor-benefit bailment b. A bailee-benefit bailment c. A mutual benefit bailment d. A commercial benefit

answer

c. A mutual benefit bailment

question

A _____ is a system of social stratification in which people are born into a social ranking, with no opportunity for social mobility. a. moksha b. class system c. caste system d. kosher

answer

c. caste system

question

Foreign countries with very low per capita incomes may, nonetheless, be attractive markets for expensive goods. Mexico, for example, has an average income of less than $1,000 but is a good market for luxury automobiles. The reason is a. consumers spend more than they can afford b. foreign consumers save more than U.S. consumers c. currency exchange rates d. income is unevenly distributed

answer

d. income is unevenly distributed

STUDY

European Free Trade Association Free Trade Area Free Trade Association Regional Economic Integration Single European Act

Global 9,10,11 – Flashcards 67 terms

Ray Collins

67 terms

Preview

Global 9,10,11 – Flashcards

question

A regional free trade agreement will benefit the world only if:

answer

The amount of trade it creates exceeds the amount it diverts

question

A(n) ____ has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members.

answer

Common market

question

An agreement between countries in a geographic region to reduce tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other is referred to as:

answer

Regional economic integration

question

All of the following were objectives of the Single European Act EXCEPT:

answer

Increasing the powers of the European Commission in matters of competitive policy

question

Bolivia, Chile, Ecuador, Colombia, and Peru signed an agreement in 1969 to create the:

answer

Andean Pact

question

In 1990, the MERCOSUR pact was expanded to include:

answer

Paraguay and Uruguay

question

The most enduring free trade area in the world is the:

answer

European Free Trade Association

question

The principle argument of those who opposed NAFTA centered on the fear that ratification would result in:

answer

Mass exodus of jobs from the United States into Mexico

question

The two main reasons that have made regional economic integration difficult to achieve are:

answer

Concerns about costs and national sovereignty

question

There are now two trade blocs in Europe. These are the:

answer

European Union and European Free Trade Association

question

What was the objective of the Single European Act?

answer

It committed member countries to work toward establishment of a single market by December 31 1992.

question

Which of the following countries are currently members of the European Free Trade Association (EFTA)?

answer

Norway, Iceland, Liechtenstein, and Switzerland

question

Which of the following is transacted when it is desirable to move out of one currency into another for a limited period without incurring foreign exchange risk?

answer

Swap

question

Which of the following is a major reason why governments limit convertibility of their currency?

answer

To preserve their foreign exchange reserves

question

How are spot exchange rates in the foreign exchange markets determined?

answer

By the relative demand and supply for different currencies

question

Which of the following is a key feature of the foreign exchange market

answer

The market never sleeps

question

Which of the following refers to the purchase of securities in one market for immediate resale in another to profit from a price discrepancy?

answer

Arbitrage

question

Assume that the yen/dollar exchange rate quoted in London at 3 p.m. is $1 = $100Yen and that the yen/dollar exchange rate quoted in New York at the same time is $1 = 120. Which profit making situation exists here?

answer

Arbitrage

question

Currency carry trade takes advantage of:

answer

Differences in interest rates between countries

question

Which of the following occurs when the quantity of money in circulation rises faster than the stock of goods and services?

answer

Inflation

question

The rapid rise in the value of the dollar on the foreign exchange market in the 1990s hurt the price competitiveness of many U.S. producers in world markets. U.S. manufacturers that relied heavily on exports saw their export volume and world market share decline. This is an example of:

answer

Economic Exposure

question

In 2002-2007, the euro rose in value against the dollar. This boosted the dollar profits of American multinationals with significant operations in Europe. Which of the following is this an example of?

answer

Translation exposure

question

A currency is said to be _____ when only nonresidents may convert it into a foreign currency without any limitations.

answer

Externally convertible

question

A U.S. company that imports laptop computers from Japan knows that in 30 days it must pay yen to a Japanese supplier when a shipment arrives. The company will pay the Japanese supplier ×150,000 for each computer, and the current dollar/yen spot exchange rate is $1 = ×110. The importer knows she can sell the computers the day they arrive for $1,600 each. However, the importer will not have the funds to pay the Japanese supplier until the computers have been sold. The importer enters into a 30-day forward exchange transaction with a foreign exchange dealer at $1 = ×105. Which of the following will happen if the exchange rate after 30 days is $1 = ×90?

answer

The importer will earn a profit of $171 per computer

question

Assume that the exchange rate between the euro and the dollar is € 1 = $1.20. A camera that retails for $300 in New York sells for € 200 in Berlin. Ignoring any transaction costs or barriers, this represents an initial arbitrage profit potential of:

answer

$60

question

You exchanged $1,000 to 105,000 yen for a trip to Japan. During your stay, you spent 50,000 yen. Also, during this period the dollar weakened against the yen to 100 to a dollar. On your return, you went to the bank to exchange the remaining yen. How many dollars did you spend on the trip?

answer

$450

question

A French company has 20 million euros it wants to invest for three months. Investing in a Thai money market account gives the company a higher return than domestic investments. Is this investment risk-free? Why or why not?

answer

No, because foreign currency movements in the intervening period can affect the profitability.

question

A _____ is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.

answer

Currency swap

question

Assume that the dollar is selling at a premium on the 30-day dollar/euro forward market. Which of the following reflects the foreign exchange dealers' expectations about the dollar over the next 30 days?

answer

The dollar will appreciate against the euro

question

The theory of purchasing power parity (PPP) links changes in the exchange rate between two countries' currencies to:

answer

Changes in the countries' price levels

question

Which is the most important foreign exchange trading center in terms of percentage of activity?

answer

London

question

_____ refers to a range of barter-like agreements by which goods and services can be traded for other goods and services.

answer

Countertrade

question

A floating exchange rate is a system under which the exchange rate for converting one currency into another is continuously adjusted depending on the law of supply and demand.

answer

True

question

Since the Bretton Woods system of floating exchange rates collapsed in 1973, the world

answer

False

question

A dirty float is called so because the central bank of a country will intervene in the foreign exchange market to try to maintain the value of its currency if it depreciates too rapidly against an important reference currency.

answer

True

question

The Central bank is similar to a Currency board and both act as banks of last resort

answer

False

question

The Bretton Woods agreement legalized the use of devaluation as a tool of competitive trade policy.

answer

False

question

A fixed exchange rate regime imposes monetary discipline on countries, thereby curtailing price inflation.

answer

True

question

If the IMF agrees that the country's balance of payments is in "fundamental disequilibrium," the system of adjustable parities allows for the devaluation of a country's currency by more than 10 percent.

answer

True

question

One criticism of the IMF is that its traditional policy prescriptions represent "one-size-fits-all" approach to macroeconomic policy that is inappropriate for many countries.

answer

True

question

Which of the following refers to the institutional arrangements countries adopt to govern exchange rates? - International Monetary Fund - Global agreement on exchange rates - International monetary system - Bretton Woods Arrangement

answer

International Monetary System

question

When the foreign exchange market determines the relative value of a currency, the country is said to adhere to a _____ exchange rate regime.

answer

Floating

question

The voting rights within the IMF are roughly proportionate to the___________ _________made by member nations. The US has 17% of the vote followed by Japan and Germany. US, Japan and Europe together account for more than 80% of the vote in the IMF. The breakdown of the democratic process becomes clear as the Jamaican people are removed from participation in the decisions that truly affect their lives.

answer

Economic contributions

question

A free trade zone is a:

answer

Geographical area in which commerce can be conducted without tariffs being applied

question

The IMF assumes that the combination of increased interest rates and ________ ______ ________ ________ will shift resources from domestic consumption to private investment. It is further assumed that keeping the price of local labor down will be an incentive for increasing employment and production.

answer

Cutbacks in government spending

question

The central bank is government owned and not separate from the country's finance ministry

answer

False

question

One of the factors that contributed to the Mexican crisis was that the central bank began converting short term debt, denominated in pesos, into dollar- denominated bonds. This conversion resulted in an increase in foreign reserves and a decrease in debt.

answer

False

question

All of the following contributed to the Asian crisis of 1997 except:

answer

Production driven by domestic demand

question

Identify the countries worst affected by the Southeast Asian crisis of 1997?

answer

Indonesia, Thailand, and South Korea

question

The Asian meltdown began in mid-1997 in _____ when it became clear that several key financial institutions were on the verge of default.

answer

Thailand

question

Which of the following actions by the Mexican government in December 1994, exacerbated the sale of the peso and contributed to the rapid 40 percent drop in its value?

answer

Currency devaluation

question

Which of the following economies in Southeast Asia was considered relatively more stable during the crisis on 1997?

answer

Singapore

question

Which of the following was the objective of establishing the International Monetary Fund (IMF)?

answer

Maintain order in the international monetary system

question

In 2001, the WTO launched a new round of talks aimed at further liberalizing the global trade and investment framework. It was held at:

answer

Doha

question

One concern of globalization critics is that a global economy shifts economic power away from _____ and toward _____.

answer

National governments; supranational organizations

question

Many economists and business leaders believe that globalization offers several benefits including:

answer

Rising incomes of consumers

question

One of the consequences of globalization that is appreciated by people from developing countries is that:

answer

The changes that progress has brought to their standard of living

question

Opponents of outsourcing in advanced economies like the U.S. and Western Europe contend that:

answer

Falling trade barriers allow firms to move manufacturing activities to countries where wage rates are much lower.

question

Supporters of globalization insist that dislocation in the form of lost jobs is a trade-off that will ultimately lead to the economy being better off. What are they justifying in this case?

answer

Free trade

question

The principle argument of those who opposed NAFTA centered on the fear that ratification would result in:

answer

Mass exodus of jobs from the United States into Mexico

question

Which three countries implemented the NAFTA?

answer

Canada, Mexico, and the United States

question

When is capital flight most likely to occur?

answer

When domestic currency depreciates rapidly because of hyperinflation

question

The absence of a legal system that protects property rights and the machinery to enforce that system usually results in:

answer

A reduction in the incentive to engage in productive economic activity

question

Five of the fastest-growing economies of the past 30 years—China, South Korea, Taiwan, Singapore, and Hong Kong—had one thing in common at the start of their economic growth:

answer

Undemocratic governments

question

Peruvian development economist Hernando de Soto has argued that much of the developing world will fail to reap the benefits of capitalism until:

answer

Property rights are better defined and protected

question

What happens when governments control or dominate a national economy?

answer

Businesses are greatly restricted with the government doing most of the controlling and siphoning.

question

Is there a relationship between open markets and political freedom?

answer

It is true that some totalitarian governments can have open markets

STUDY

Five Forces Model Free Trade Agreement Free Trade Area International Marketing Key Success Factors Value Chain Analysis World Trade Organization

ISDS 3115 Kelle Chapter 2 – Flashcards 85 terms

Noel Macdonald

85 terms

Preview

ISDS 3115 Kelle Chapter 2 – Flashcards

question

maquiladoras

answer

Mexican factories located along the U.S. Mexican border that receive preferential tariff treatment

question

World trade organization

answer

an international organization that promotes world trade by lowering barriers to the free flow of goods across borders

question

North American Free Trade Agreement

answer

a free trade agreement between Canada, Mexico, and the US

question

European Union

answer

a European trade group that has 27 member states

question

Mission

answer

the purpose or rationale for an organization's existance

question

Strategy

answer

how an organization expects to achieve its missions and goals

question

competitive advantage

answer

the creation of a unique advantage over competitors

question

differentiation

answer

distinguishing the offerings of an organization in a way that the customer perceives as adding value

question

experience differentiation

answer

engaging a customer with a product through imaginative use of the five senses, so the customer "experiences" the product

question

low-cost leadership

answer

achieving maximum value, as perceived by the customer

question

Response

answer

a set of values related to rapid, flexible, and reliable performance

question

resource view

answer

method managers use to evaluate the resources at their disposal and manage or alter them to achieve a competitive advantage

question

value-chain analysis

answer

a way to identify those elements in the product/service chain that uniquely add value

question

five forces model

answer

a method of analyzing the five forces in the competitive environment

question

SWOT analysis

answer

a method of determining internal strengths and weaknesses and external opportunities and threats

question

Key Success Factor (KSFs)

answer

activities or factors that are key to achieving competitive advantage

question

Core competencies

answer

a set of skills, talents, and capabilities in which a firm is particularly strong

question

activity map

answer

a graphical link of competitive advantage, KSFs, and supporting activities

question

outsourcing

answer

transferring a firm's activities that had traditionally been internal to external suppliers

question

theory of comparative advantage

answer

a theory which states that countries benefit from specializing in (and exporting) goods and services in which they have relative advantage, and they benefit from importing goods and services in which they have a relative disadvantage

question

international business

answer

a business that engages in cross-border transactions

question

Multinational corporation (MNC)

answer

a firm that has extensive involvement in international business, owning or controlling facilities in more than one country

question

international strategy

answer

a strategy in which global markets re penetrated using exports and licenses

question

multi-domestic strategy

answer

a strategy in which operating decisions are decentralized to each country to enhance local responsiveness

question

global strategy

answer

a strategy in which operating decisions are centralized and headquarters coordinates the standardization and learning between facilities

question

transnational strategy

answer

a strategy that combines the benefits of global-scale efficiencies with the benefits of local responsiveness

question

which of the following international operations strategies involves a high degree of centralization?

answer

global

question

impacts changes in laptop computer design that builds in wireless technology might have on OM strategy

answer

new human resource skills inventory needs to be revised capital investment is added for new equipment or processes

question

impacts technology innovation in the manufacturing process might have on OM strategy

answer

new human resource skills quality standards need o be revised inventory needs to be adjusted

question

What is the difference between a multinational corporation and an international business?

answer

For the multinational firm, the business done outside the country is especially significant

question

The stated purposed of NAFTA is to

answer

phase out all trade and tariff barriers among Canada, Mexico and the U.s

question

what are the reasons why domestic business operations decide to change to some form of international operation?

answer

improve operations improve products improve the supply chain

question

A strategy is

answer

an action plan to achieve a mission

question

what is the purpose or rationale for an organizations existence?

answer

mission

question

example of differentiation

answer

Hunter fan as its a premier maker of quality ceiling fans that lower heating and cooling costs for its customers

question

example of cost leadership

answer

wal mart, as it has the low overhead and huge buying power to pressure its suppliers into concessions

question

example of response

answer

johnson electric, as it competes on speed - speed design, productivity , and delivery

question

competing on differentiation is

answer

concerned with uniqueness

question

IS NOT one of the 10 strategic OM decisions listed in the text

answer

finance/accounting ---- this is a primary function to an organization

question

which is an OM strategy / issue during the growth stage of the product life cycle?

answer

forecasting critical shift towards product focus enhance distribution

question

SWOT analysis refers to

answer

strengths opportunities weaknesses threats

question

Advantages of outsourcing

answer

accessing outside technology gaining outside expertise cost savings

question

An international business is a firm that

answer

engages in international trade or investment

question

which of the following international operations strategies uses decentralized authority with substantial autonomy at each business?

answer

multidomestic

question

globalization strategies could simplify the operations managers job T>F

answer

True

question

3 strategic approaches =

answer

differentiation response cost leadership

question

What is a graphical link of competitive advantage, KSF's , and supporting activities?

answer

activity map

question

the creation of a unique advantage over competitors is referred to as

answer

competitive advantage

question

what is an international strategy that involves a high degree of centralization?

answer

global

question

a method managers use to evaluate the resources at their disposal and mange or alter them to achieve competitive advantage is referred to as

answer

resources view

question

DISADVANTAGES of outsourcing

answer

negative impact on employees loss of control risks may not manifest themselves for years

question

the OM strategy issues during the introduction stage of the product life cycle

answer

frequent product and process design changes limited models high production costs

question

competing on cost is

answer

achieving maximum value as perceived by the customer

question

A strategy is established prior to establishing a mission the purpose for which an organization is established an action plan to achieve a mission a functional area of the firm

answer

an action plan to achieve a mission

question

Which of the following is NOT one of the three strategic approaches to competitive advantage? cost leadership differentiation response innovation

answer

innovation

question

Which of the following is the purpose of rationale for an organizations existence? articles of incorporation strategy charter mission

answer

mission

question

Which of the following is NOT one of the 10 strategic OM decisions listed in the text? location layout quality finance/accounting

answer

finance/accounting

question

Which of the following is NOT an OM strategy/issue during the introduction stage of the product life cycle? frequent product and process design changes high production costs limited models long production runs

answer

long production runs

question

Which of the following is NOT an OM strategy/issue during the growth stage of the product life cycle? reduce capacity shift towards product focus forecasting critical enhance distribution

answer

reduce capacity

question

A method managers use to evaluate the resources at their disposal and manage or alter them to achieve competitive advantage is referred as resources view competitive advantage value chain analysis five forces analysis

answer

resources view

question

value chain analysis is a way to identify those elements in the product/service chain that uniquely add value

answer

question

What impacts the maturing of a product might have on OM strategy below purchasing needs to be revised product changes decrease cost cutting is instituted capital investment is added for new equipment or processes optimum capacity may be achieved new human resources skills

answer

product changes decrease cost cutting is instituted optimum capacity may be achieved longer production runs are used optimum capacity may be achieved design compromises are instituted

question

what impacts technology innovation in the manufacturing process might have on OM strategy quality standards need to be revised product design needs to be revised labor skills decrease cost cutting instituted inventory needs to be revised manufacturing process stabalizes

answer

quality standards need to be revised product design needs to be revised inventory needs to be revised product designs needs to be revised purchasing needs to be revised inventory needs to be revised

question

which impacts in laptop computer design that bulds in wireless technology might have on OM strategy manufacturing process stabalizes product changes decrease purchasing needs to be revised longer production runs are used inventory needs to be revised maintenance procedures need to be revised

answer

purchasing needs to be revised inventory needs to be revised maintenance procedures need to be revised

question

correct impacts that major increases in oil prices might have on OM strategy for the energy inefficient company, change in competitive position for a producer with high energy costs change in the competitive position for the energy inefficient company , change in the cost structure , result in higher selling prices for a producer with high energy costs, change in the cost structure, result in higher selling prices

answer

for the energy inefficient company, change in competitive position for a producer with high energy costs, change in the cost structure, result in higher selling prices

question

what impacts the OM strategy if there are correct impacts on water and air quality legislation difficulty in using the specific technologies increasing production cost closing of numerous plants including paper mills and steel mills difficulty in predicting both the cost of production and the market demand

answer

difficulty in using the specific technologies increasing production cost closing of numerous plants including paper mills and steel mills

question

what impacts that fewer young prospectie employees entering the labor market might have on OM strategy high unemployment rates tighter job market change in the income of employees in the lower pay classifications added capital investment for new equipment or processes

answer

tighter job market

question

impacts that inflation versus stable prices have on OM change in the income of employees in the lower pay classifications the manufacturing process stabilizes OM function focuses more on standardization difficulty in predicting both the cost of production and the market demand

answer

difficulty in predicting both the cost of production and the market demand

question

impacts legislation moving health insurance from a pretax benefit to taxable income change in the income of employees in the lower pay classifications increase in the take home pay of employees by the amount of the taxes operations managers get pressure to in crease wages of employees in the lower pay classifications decrease in the take home pay of employees by the amount of taxes

answer

change in the income of employees in the lower pay classifications operations managers get pressure to in crease wages of employees in the lower pay classifications decrease in the take home pay of employees by the amount of taxes

question

SWOT analysis refers to strengths , opponents , weaknesses, and threats support opponents weaknesses and threats strengths , opportunities , weaknesses, and threats

answer

strengths , opportunities , weaknesses, and threats

question

What is a graphical link of competitive advantage , KSF's , and supporting activities

answer

activity map

question

A set of skills , talents, and capabilities in which a firm is particularly strong is referred to as core competencies differentiation key success factors experience differentiation

answer

core competencies

question

KSF are defined as activities or factors that are key to achieving competitive advantage

answer

question

Which of the following is the core competence for Honda? product flexibility gas powered engines sustainable design advertising

answer

gas powered engines

question

Parent company of ARROW SHIRTS AND COUNTRY

answer

bidermann International france

question

Parent company of Braun Household Appliences

answer

Proctor and Gamble U.S

question

Parent company of Volvo autos

answer

Geely china

question

Parent company of Firestone Tires

answer

bridgestone japan

question

godiva chocolate

answer

campbell soup u.s

question

haagen dazs ice cream

answer

nestle switzerland

question

jaguar autos

answer

tata india

question

MGM movies

answer

credit lyonnais France

question

lamborghini Autos

answer

volkswagen germany

question

good rich tires

answer

michelin france

question

alpo pet foods

answer

nestle switzerland

STUDY

Free Trade Area Flashcards, test questions and answers

We've found 9 Free Trade Area tests

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards