The economic dimension Test Bank Answers Chapter.8

Chapter 8

Test Bank

Type: true-false

Title: Chapter 08 Question 01

1) Economic conditions of countries are indicators of whether future investment or disinvestment by a firm will be appropriate.

a. True

Feedback: Factors such as economic growth rates, market trends, and the economic policy of governments are likely to affect the profitability and performance of existing operations and whether or not future investment or divestment is required

A-head reference: 8.2 The availability, usefulness, and interpretation of economic indicators

b. False

Type: true-false

Title: Chapter 08 Question 02

2) The ability to fine-slice elements of the value chain and relocate them across national borders to where they can be performed the best will generate greatest value to the host country firm

a. True

b. False

Feedback: Fine-slice elements of the value chain will generate the greatest value to the lead firm

A-head reference: 8.1 Introduction

Type: true-false

Title: Chapter 08 Question 03

3) Risk from an economic perspective, is the potential that the return achieved from a business endeavour is not that which was expected

a. True

Feedback: Includes financial risk, operational risk, and certain aspects of political risk

A-head reference: 8.1 Introduction

b. False

Type: true-false

Title: Chapter 08 Question 04

4) All country-level macroeconomic statistics and indicators are to be taken at face value as the basis for taking commercial decisions because national economic data is reliable

a. True

b. False

Feedback: All economic variables are only estimates, and macroeconomic statistics and indicators in particular require careful and cautious interpretation when used as the basis for commercial decisions

A-head reference: 8.2 The availability, usefulness, and interpretation of economic indicators

Type: true-false

Title: Chapter 08 Question 05

5) Business conditions of a country are shaped, to a great extent, by the nature of its prevailing economic system

a. True

Feedback: The economic system influences how much freedom businesses have to operate as they wish.

A-head reference: 8.3 Economic systems

b. False

Type: true-false

Title: Chapter 08 Question 06

6) A command economy is an economic system in which the production and investment decisions in a country are set by the interplay of demand and supply in a way that signals to producers what to produce and to consumers what to purchase

a. True

b. False

Feedback: In a command economy decisions in a country are formulated in a top-down manner by a state authority – usually a government or government agency

A-head reference: 8.3 Economic systems

Type: true-false

Title: Chapter 08 Question 07

7) Members of the European Union reflect examples of free market economies.

a. True

b. False

Feedback: They reflect examples of mixed economies.

A-head reference: 8.3 Economic systems

Type: true-false

Title: Chapter 08 Question 08

8) Command economies are regarded as stimulating innovation and entrepreneurship

a. True

b. False

Feedback: Command economies are regarded as inhibiting innovation and entrepreneurship

A-head reference: 8.3 Economic systems

Type: true-false

Title: Chapter 08 Question 09

9) Economic freedom generally has the effect of reducing transaction costs and ameliorating some of the liability of foreignness

a. True

Feedback: Transparency and confidence in the operating environment is higher in a freer society, reducing the perceived and actual risks

A-head reference: 8.3 Economic systems

b. False

Type: true-false

Title: Chapter 08 Question 10

10) A country’s economic size provides a strong indication as to the scale of business opportunities offered by a country

a. True

Feedback: It is an indication of the absolute value of final markets and the total demand for goods and services relative to other countries

A-head reference: 8.4 Key Economic Indicators

b. False

Type: multiple response question

Title: Chapter 08 Question 11

11) Economic factors when used as the basis for taking commercial decisions in combination determine Please select all that apply.

Feedback: The overall attractiveness of a foreign country as a sales, production or investment location determine opportunities, costs and risks associated with doing business in a foreign location

A-head reference: 8.4 Key Economic Indicators

a. Uncertainty

b. Opportunities

c. Costs

d. Risks

Type: multiple response question

Title: Chapter 08 Question 12

12) The main features of a planned economy are: Please select all that apply.

Feedback: Planned economies are in its entirety or to a large degree controlled by the state and the use of resources are planned by the state.

A-head reference: 8.3 Economic systems

a. Majority of resources are owned by the state

b. Production and distribution of goods and services determined by the state

c. Limited legal restrictions on market forces

d. Strong rule of law

Type: multiple response question

Title: Chapter 08 Question 13

13) Inflationary pressures in general have an adverse effect on: Please select all that apply.

Feedback: Inflation is an indicator of national economic well-being.

A-head reference: 8.4 Key Economic Indicators

a. National economic performance

b. Political stability

c. Exchange rates

d. Social cohesion

Type: multiple response question

Title: Chapter 08 Question 14

14) Various types of labour-related cost that exert a strong effect on the location decisions of global factories are: Please select all that apply.

Feedback: Labour-related costs constitute a large portion of total operational costs for a firm and differential labour costs can exert a strong effect on location decisions.

A-head reference: 8.4 Key Economic Indicators

a. Wage rates

b. Earnings

c. Take-home pay

d. Pension and social security contributions

Type: multiple response question

Title: Chapter 08 Question 15

15) The balance of payments is _______ (select all that applies)

Feedback: The balance of payments is a statement of a country’s trade and financial transactions with the rest of the world in a given period—usually, a year. Comparative data on a country’s balance of payments represent another general indicator of economic well-being, especially in relation to other countries. There are two components to a country’s reported balance of payments: the current account; and the capital account.

A-head reference: 8.4 Key Economic Indicators

a. … a statement of a country’s trade and financial transactions with the rest of the world in a given period—usually, a year.

b. … a key economic indicator

c. … a measure of economic exposure

d. … made of two components: the current account and the capital account.

Type: multiple choice question

Title: Chapter 08 Question 16

16) Potential impact of inflation on global factory firms is:

Feedback: Unless incomes rise commensurately consumers spend less as prices of goods and services increase

A-head reference: 8.4 Key Economic Indicators

a. Signals low economic growth

b. Signals reduced government spending

c. Signal a lack of market economic systems

d. Reduces consumer spending

Type: multiple choice question

Title: Chapter 08 Question 17

17) Gross national income (GNI) is…

Feedback: The value of all domestic production (foreign and locally owned), plus income (e.g. interest and dividends) from the international production activities of national companies abroad (in a given year); a preferred measure of the World Bank

A-head reference: 8.4 Key Economic Indicators

a. The value of all domestic production, plus income from the international production activities of national companies abroad (in a given year);

b. The least preferred measure of the World Bank.

c. The value of all final goods and services produced within a nation, plus the income earned by its citizens abroad, minus the income earned by foreigners from domestic production

d. The total market value of all final goods and services produced and sold within a country; equal to total private consumption, investment, and government spending, plus net exports (the value of exports minus the value of imports) in a given year.

Type: multiple choice question

Title: Chapter 08 Question 18

18) Changes in the value of a currency when normalising for changes in the domestic price level is referred to as the:

Feedback: Use of some deflator to account for price inflation reflects the real exchange rate

A-head reference: 8.5 Exchange rates and exchange rate policies

a. Real exchange rate

b. Spot exchange rate

c. Forward exchange rate

d. Hedge

Type: multiple choice question

Title: Chapter 08 Question 19

19) When a government or central bank determines the value at which a national currency is linked to one or more reference currencies for an extended period of time, is know as:

Feedback: A policy by a government or central bank to reflect stability with respect to the foreign exchange market

A-head reference: 8.5 Exchange rates and exchange rate policies

a. Fixed exchange rate

b. Floating exchange rate

c. Crawling exchange rate peg

d. Managed float

Type: multiple choice question

Title: Chapter 08 Question 20

20) Where a group of countries share a common but distinct currency is know as:

Feedback: It is often associated with a trade bloc and involves a regional central bank, i.e. the euro

A-head reference: 8.5 Exchange rates and exchange rate policies

a. Monetary union

b. Third-country currency

c. Currency substitution

d. Currency board