CBM 321 FINAL REVIEWER TOPIC 2 GLOBAL AND INTERNATIONAL BUSINESS

TOPIC 1 INTRODUCTION TO MACROECONOMICS 1. Exporting countries can earn __________ from importing
countries.
1. Which of the following would not be included in the GDP
for 2009? a. foreign exchange

d. Mazda’s expenditures on steel for producing the latest 2. MNCs from __________ countries dominate international
car model in 2009 business.

2. The National income accounting refers to as: b. developed

b. A set of rules and definitions that measure economic 3. Tax sops and financial incentives are examples of
activity in aggregate. __________ to attract foreign capital and business.

3. Real GDP can be best described as: c. government benefits

c. The market value of products and services generate in 4. __________ companies can function remotely and sell
the economy based on the prices of a given year. their products worldwide.

4. Philippine economy is producing and selling millions of d. E-commerce

various products. To sum them up to a single aggregate,
5. Which of the following could be defined as a multinational
each good is weighted by:
company?
b. Market prices.
c. A firm owning a chain of supermarket outlets outside its
5. In calculating nominal GDP: country of origin.

c. The average output of each final products and services 6. Which of the following can be used to enter or expand
generate by the economy in a given year by its price that international operations for a firm?
year and then add the result.
a. Exporting b. Licensing c. Joint venture d. All of the above
6. In calculating GDP, the amount of each final products and
7. ________ is the most common form of international
service generate must first be weighted by:
business activity.
a. Market prices.
a. Exporting
7. Which of the examples below is an intermediate product?
8. The cross-border flow of goods and services is called
c. Boise Cascade manufactured the lumber and sold it to a international trade.
builder of new houses.
a. True
8. Which of the following is a final good, or service example?
9. One of the key benefits of international trade is that it
b. A CD player bought as a gift. allows consumers and producers to benefits by exploiting
each country’s comparative advantages.
9. Double counting does not occur in the national income
accounts if GDP is measured by summing all: b. True

a. Sales of final output. 10. The ability to outsource is a key disadvantage of

international trade for companies looking to reduce cost.
10. Given a four-sector economy, which of the following
equations is not correct? d. False

a. Y = C + I + G + IM – EX

b. Y = C + S + T

c. Y + IM = C + I + EX

d. I + G + EX = S + T + IM
TOPIC 3 INTERNATIONAL BUSINESS DIFFERENCES TOPIC 5 :BASIC THEORY USING DEMAND AND
SUPPLY IN TRADE
1. Globalization means:
1. The Supply Curve is upward sloping because:
a. A more integrated and interdependent world

2. Which of these does NOT facilitate globalization?

c. As the price increases, suppliers can earn higher levels
of profit or justify higher marginal costs to produce more
b. Barriers to trade and investment
2. Part of the reason that Michael Jordan earns millions of
3. Which of the following is globalization driven? dollars each year while school teachers may earn 30,000
c. Technological advance.
is because

4. Globalization is good for business, because a) The supply of superstar basketball players is very
low, while the supply of competent teachers is
c. It opens up new market opportunities. much larger.
b) Demand for Michael Jordan's talents is very high
5. The internet facilitates globalization by:
since he can generate so much revenue for a
b. Cutting the cost for firms of communicating across firm.
borders. c) Consumers enjoy basketball to the point that
they are willing to spend lots of money and time
6. Globalization can create problems for business because:
a. It can result in more competition. attending games and watching commercials.

7. Globalization occurs when there is increased economic d. All of the Above

integration among countries? a. True 3. When college students leave town for the summer, the
8. Globalization increase the demand for unskilled labor in demand for meals at the local restaurants declines. This
the Philippines which in turn reduce labor’s bargaining results in
power. d. False
c. a decrease in equilibrium price and quantity.
9. Which of the following is a valid statement about
4. All the following shift the demand curve for
globalization?
automobiles to the right except:
a) Opening up exchange often leads to greater
productivity for Pareto efficiency b. a brand-new automobile dealership opens in town.
b) Countries that have been more globalized typically 5. If the cost of computer components falls, then
have political institutions.
c) When trade between poor and rich countries c. the supply curve for computers shifts to the right
increases, low wage workers in rich countries can
be made worse off
6. What happens in the market for airline travel when the
price of traveling by rail decreases?
d. All of the above
a. The demand curve shifts left.
10. Globalization includes:
7. If a sin tax is placed on sales of alcohol,
a) A stretching of social, political, and economic
activities across political frontiers. c. the supply curve shifts to the left.
b) An accelerating pace of global interactions and
8. When a price ceiling is imposed above the equilibrium
processes associated with a deepening
price,
enmeshment of the local and the global.
c) growing magnitude of interconnectedness in c. the equilibrium outcome prevails.
almost every sphere of social existence.
9. If the demand curve shifts to the right, then we move
d. All of the above up and to the right along our supply curve.

a. True

10. If the cost of making bicycles falls, the price goes

down, causing the demand curve to shift to the right. b.
False
TOPIC 6: THEORIES OF INTERNATIONAL 9. The reasons why international trade has strong
TRADE UNIT LEARNING OUTCOME effects on distribution of income because:
1. Transportation cost of trade affects: a. Resources cannot move immediately or
without cost from one industry to another
a. Pattern of trade
b. Industries differ in the factors of production
c. boundaries between tradable and non-tradable
they demand
goods
b. Global supply chains d. Both A and B
d. All of the above
10. Which of the following is not a benefit of
2. A no-trade world will have which of the following international trade?
characteristics:
a. High wage level for all domestic workers
a. Countries will have same relative endowment of
production factor 11. Bangladesh is relatively abundant in labor, while
b. Consumers across countries will have identical and Canada is relatively abundant in capital. In both
homogenous tastes countries the production of shirts is relatively more
c. There will be no distortions or externalities labor intensive than the production of computers.
d. All of the above According to the factor endowment theory (Heckscher-
Ohlin model), Bangladesh will have a(n):
3. In the 2-factor, 2 goods Heckscher-Ohlin model, the
two countries differ in c. Comparative advantage in production of shirts

c. relative availabilities of factor of production 12. Free traders maintain that an open economy is
advantageous in that it provides all of the following
4. According to Ricardo, a country will have a except:
comparative advantage in:
d. Relatively high wage levels for all domestic
c. Industries that sell to domestic and foreign buyers workers.
5. Nations conduct international trade because: 13. A closed economy is one in which?
b. Resources are not equally distributed among all c. The home economy is isolated from foreign trade
trading nations.
14. Ricardian trading principle emphasis the;
6. Which of the following is a determinant of trade?
c. Role of comparative advantage
a. Tastes
b. Technological change 15. Under Heckscher-Ohlin Model, international trade
c. Per capital income can lead to increase in:

d. All of the above b. Output of both products and consumer welfare in

both countries
7. International Trade is most likely to generate short-
term unemployment in:

b. Import-competing industries

8. According to the theory of comparative advantage,

which of the following is NOT a reason why countries
trade?

d. Exports give a country a political advantage over

other countries that export less.
TOPIC 7: GOVERNMENT POLICY AND 14. Limit of the amount (quantity) of a good that can
INTERNATIONAL TRADE POLICY be imported is called a(n),
1. General Agreement on Tariffs and Trade (GATT) c. Quota
went into effect?
15. A protective tariff is intended to protect the;
b. 1948
d. Manufacturer or farmer from lower priced goods
2. GATT was initially signed by how many countries, imported into the country.
including the USA? c. 23
16. All of these restrict international Trade EXCEPT
3. Name the Agreement which was signed by the
United States. Canada and Mexico towards removing d. Trade deficits
trade barriers? c. NAFTA
17. What are tariffs?
4. When was GATT replaced with WTO? c. 1995
d. Taxes on the import or export of goods from a
5. Does WTO come as the third economic pillar of country
world-wide dimensions along with the World Bank and
18. When one country refuses to trade with another
___________? a. International Monetary Funds (IMF)
country because of political or infringements of human
6. Which of the following is the main objective behind rights it is called:
the establishment of WTO?
b. Embargo
a. To settle disputes between nations
19. In 2019, China placed a tax on imported American
b. To widen the principle of free Trade to sectors
poultry of u to 105. 4%. This is an example of a?
such as services and agriculture
c. To cover more areas than GATT a. Tariff

d. All of them 20. Japanese auto firms agree to limits set in

Washington D.C., on the number of Japanese cars that
7. Which of the following is the headquarters of the
may be sold in the U.S.
World Trade Organization (WTO
c. Quotas
c. Geneva

8. How many countries are the current members of

WTO?

c. 161

9. China became a member of world trade Organization

in_________? d. 2001

10. When did World Trade Organization come into

effect?

b. January 1, 1995

11. Which of the following is classed as a tariff barrier?

c. Taxes on Imports

12. The U.S. band beef imports from Canada after a

Mad Cow Disease outbreak there. This is an example of
which type of barrier to trade? a. Standards

13. Government payments to a local supplier to reduce

the supplier cost. This helps local businesses survive
because it is getting direct aid from the federal
government. What is this called?

d. Subsidy
TOPIC 8: FOREIGN DIRECT INVESTMENT Suppose that Mexico has previously had restrictions on
inflows of foreign direct investment from all sources,
1. Which of the following would be an example of
including the United States. Then suppose that they
foreign direct investment from the United States to
remove those restrictions on flows from the United
Taiwan?
States in a particular industry, say hammocks. As a
IV. Warren Buffet (a U.S. citizen) buys a controlling result, several hammock producers in the U.S. move
share in a Taiwanese electronics firm. production to Mexico via FDI. Indicate for each of the
groups below whether you expect them to gain or to
2. What is the relationship between foreign direct
lose from this flow of investment.
investment (FDI) and multinational enterprises
(MNEs)? 10. Workers previously employed in hammock
production in the U.S.
c. All MNEs involve FDI.
b. Lose
3. If a German manufacturer of household appliances
wants to take advantage of the cheaper labor available 11. Workers previously employed in hammock
in the Czech Republic, which of the following actions production in Mexico. a. Gain
will not serve that purpose?
12. Owners of firms that move production to Mexico.
b. Build a plant in the Czech Republic and send all b. Gain
German workers to operate it.
13. Owners of U.S. hammock firms that do not move
4. The Foreign Direct Investment includes production to Mexico d. Lose

a. Tangible Goods 14. Owners of firms in Mexico that previously produced

hammocks. b. Lose
5. For spreading information, the foreign policy
decision-makers rely on; 15. Consumers of hammocks (assume that there
already was free Trade in hammocks). a. Gain
a. Media

6. More expansion of foreign direct investment can

boost

a. Employment

7. When capital and labor are moved internationally to

will develop the;

c. Economic growth

8. Which of the following is an example of horizontal

FDI?

d. General Motors Corporation builds a plan in Chins

to supply Buicks to the Chinese market.

9. Which of the following statement refer to a vertical

FDI?

a. Ford Motors company establishes a plant in Canada

TOPIC 9: REGIONAL ECONOMIC 11. In April 2000, one U.S. dollar traded on the foreign
INTEGRATION exchange market for about 44 Indian rupees. Thus, one
Indian rupee would have purchased about
1. The exchange rate is;
b. 0.02 U.S. dollars.
d. the price of one currency relative to another.
12. In April 2000, one U.S. dollar traded on the foreign
2. Exchange rates are determined in;
exchange market for about 180 Spanish pesetas.
b. the foreign exchange market Therefore, one Spanish peseta would have purchased
about
3. Although market trades are said to involve the
buying and selling of currencies, most trades involve a. 0.005 U.S. dollars.
the buying and selling of;
13. In April 2000, one U.S. dollar traded on the foreign
a. bank deposits denominated in different currencies. exchange market for about 1.47 Canadian dollars.
Therefore, one Canadian dollar would have purchased
4. When the value of the British pound changes from
about
$1.25 to $1.50, then
c. 0.67 U.S. dollars
c. The pound has appreciated, and the dollar has
depreciated. 14. At the beginning of 1980, the French franc was
valued at 25 cents and in early 1988 it was valued at
5. When the value of the British pound changes from
17.5 cents. Thus, from 1980 to 1988, the dollar _____
$1.50 to $1.25, then
and the franc _____.
b. The pound has depreciated, and the dollar has
b. appreciated; depreciated
appreciated.
15. f the dollar _____ from 1.0 European euros per
6. When the value of the dollar changes from 0.5
dollar to 0.9 euros per dollar, the euro _____ from 1.0
pounds to 0.75 pounds, then
dollar to 1.1 dollars per euro.
b. The pound has depreciated, and the dollar has
d. depreciates; appreciates
appreciated.
16. If the dollar _____ from 5 Mexican pesos per dollar
7. When the value of the dollar changes from 0.75
to 10 pesos per dollar, the peso _____ from 20 cents to
pounds to 0.5 pounds, then
10 cents per peso.
c. The pound has appreciated, and the dollar has
b. appreciates; depreciates
depreciated.
17. f the dollar appreciates from 5 French francs per
8. When the exchange rate for the Mexican peso
dollar to 10 francs per dollar, the franc depreciates
changes from 9 pesos to the dollar to 10 pesos to the
from _____ cents to _____ cents per franc.
dollar, then
a. 20; 10
b. The peso has depreciated, and the dollar has
appreciated. 18. If the British pound appreciates from $0.50 to $0.75
per U.S. dollar, the dollar depreciates from _____ to
9. When the exchange rate for the Mexican peso
_____ pounds per dollar.
changes from 10 pesos to the dollar to 9 pesos to the
dollar, then b. 2; 1.33

c. The peso has appreciated, and the dollar has 19. If the Japanese yen appreciates from one cent to
depreciated. two cents per yen, the dollar depreciates from _____
to _____ yen per dollar.
10. In April 2000, one U.S. dollar traded on the foreign
exchange market for about 7.2 French francs. a. 100; 50
Therefore, one French franc would have purchased
20. If the dollar appreciates from 1.5 Brazilian reals per
about
dollar to 2.0 reals per dollar, the real depreciates from
d. 0.14 U.S. dollars. _____ to _____ dollars per real. a. $0.67; $0.50
Topic 10.1: General Features of Foreign Exchange 6. In the 1850s the French franc was valued by both
Market gold and silver, under the official French ratio which
equated a gold franc to a silver franc 15 and ½ times as
1. The international monetary system can be defined
heavy. At the same time, the gold from newly
as the institutional framework within which of the
discovered mines is California poured into the market,
following?
depressing the value of gold as a result,
a. International payments are made
b. The franc effectively become a gold currency
b. Movement of capital is accommodated
c. Exchange rate among currencies are 7. Suppose that the United States is on a bimetallic
determined standard at $30 to one ounce of gold and $2 for one
ounce of silver. If new silver mines open and flood the
d. All of the above
market with silver;
2. Corporations today are operating in an environment
a. Only the silver currency will circulate
in which exchange rate changes may adversely affect
their competitive positions in the marketplace. This 8. Prior to the 1870s, both gold and silver were used as
situation, in turn, makes it necessary for many firms to. international means of payment and the exchange
rates among currencies were determined by either
a. Carefully manage their exchange risk exposure
their gold or silver contents. Suppose that the dollar
b. Carefully measure their exchange risk
was pegged to gold at $30 per ounce, the French franc
exposure
is pegged to gold at 90 francs per ounce and to silver at
c. Both a and b 9 francs per ounce of silver, and the German mark
pegged to silver at 1 mark per ounce of silver. What
3. The international monetary system went through
would the exchange rate between the U.S. dollar and
several distinct stages of evolution. These stages are
German mark be under this system?
summarized, in alphabetic order, as follows:
c. 1 German mark = $3
I. Bimetallism
9. Suppose that country A and country B are both on a
IV. Flexible Exchange Rate Regime
bimetallic standard. In country A the ratio is 15 to one
II. Bretton Woods System (i.e. an ounce of gold is worth 15 times as much as an
ounce of silver in that currency), while in country B the
V. Interwar Period ratio is ten to one. If the free flow of capital is allowed
III. Classical Gold Standard The chronological order that between countries A and B is this sustainable
they actually occurred is; framework?

b. I, III, V, II and IV b. No

4. In the United States, Bimetallism was adopted by the 10. The United States adopted the gold standard in a.
Coinage Act of 1792 and remained a legal standard b. 1879
until 1873,

a. When Congress dropped the silver dollar from the

list of coins to be minted

5. The monetary system of bimetallism is unstable. Due

to the Fluctuation of the commercial value of the
metals,

c. The metal with a commercial value higher than

currency value tends to be used as metal and is
withdrawn from circulation as money (Gresham’s
Law)
ADDITIONAL QUESTIONS 8. What happens if a quota has been keeping the domestic
price above the world price, but then the world price rises
1. Which of the following would be an example of foreign above what has been the domestic price?
direct investment from the United States to Taiwan?
e. Quota rents become zero.
e. Warren Buffet (a U.S. citizen) buys a controlling share in
a Taiwanese electronics firm. 9. Who, according to the reading by Lindsey and Ikenson,
supports continuing U.S. anti- dumping laws in their current
3. What is the connection, if any, between comparative form?
advantage (CA) and foreign direct investment (FDI)?
c. The U.S. government, encouraged by protectionist
c. Countries often engage in FDI in industries where the interests in the U.S.
country they invest in has a comparative advantage.
10 A specific tariff is
4. If a German manufacturer of household appliances wants
to take advantage of the cheaper labor available in the Czech d. A tax on imports defined as an amount of currency per
Republic, which of the following actions will not serve that unit of the good.
purpose?
2. A tariff on imports benefits domestic producers of the
b. Build a plant in the Czech Republic and send all German imported good because.
workers to operate it.
b. It raises the price for which they can sell their product on
5. Tariff Jumping occurs when the domestic market.

a. A firm that otherwise would have exported to a country 3. When a large country levies a tariff on imports
instead invests there in order to avoid paying the country’s
a. The world price falls.
tariff.
b. Demanders of the good on the domestic market are hurt
1. Which of the following is not a non-tariff barrier?
c. Foreigners are hurt.
b. A tax equal to 12% of value on imported oil.
d. The domestic price rises by less than the tariff.
2. When the United States imposed a VER on cars from Japan
e. All of the above.
a. Japanese firms were the recipients of the rents from the
quantitative restriction. 4. Starting from free trade, when a tariff is applied to
imports in a small country, which
3. The main difference between a tariff and a quota is
of the following increase?
e. A tariff generates government revenue, while a quota,
unless it is sold, does not. I. Domestic output
4. A government procurement regulation or practice II. Domestic demand
constitutes a nontariff barrier when
III. Domestic price
b. Government shows a preference for domestic sellers
over foreign sellers. IV. Tariff revenue

5. Which of the following is an example of a recent V. Quantity of imports

government use of a “buy local” requirement, as mentioned c. I, III, and IV only
in the assigned article in the Economist?
5. According to the assigned article by Feenstra
d. Argentina’s requirement that 30% of music broadcast
must be local a. The efficiency costs of U.S. protectionism are quite small,
less than one percent of U.S. GDP.
6. Import quotas are most commonly administered
7. Which of the following refers to the fact that a large
e. By granting import rights to foreign firms or country can benefit by levying a tariff?
governments.
a. The “optimal tariff”
7. Which of the following will cause the tariff equivalent of a
quota to increase in a small country? b. The “terms of trade effect of a tariff”

b. A decrease in domestic supply (the supply curving c. The “monopoly effect of a tariff”
shifting left).
d. All of the above
8. The WTO’s Agreement on Textiles and Clothing promised 5. Factor Price Equalization means that,

b. To phase out all quotas on textiles and apparel by Dec. e. Free trade causes identical factors in different countries
31, 2004. to be paid more nearly the same than they were in autarky.

1. The following include several reasons that government 6. Table 1 of Bivens, “Globalization and American Wages,”
might give for using a tariff on imports? Which is not valid, shows calculated effects of globalization on incomes of US
in the sense that the effect described will not happen. middle-income households in 1995 and 2006. Why is the
effect in 2006 so much larger than in 1995?
b. To help consumers.
a. Because the share of less developed countries in trade
2. For many purposes, the use of a tariff is said by economists
was larger in 2006 than in 1996
to be “second best.” This means that
7. Which of the following is one of the implications of the
c. Another policy exists that would accomplish the same
New Trade Theory?
purpose as the tariff at lower economic cost.
c. Consumers gain from the increased variety of goods that
3. By restricting imports with a tariff, a large country will
trade makes available.
a. Improve its terms of trade.
8. Which of the following best captures Krugman’s view of
b. Increase the welfare of other countries. the lesson of the New Trade Theory for trade policy,
according to his article “Is Free Trade Passé”?
4. According to the infant-industry argument for a tariff,
d. Countries will most likely gain from trade, and in any
d. A tariff can protect a new industry while it gains case they are not likely to do better if their governments
experience and reduces costs. intervene.
5. Those in high-wage countries who fear trade with low- 9. Which of the following is a distinctive implication of the
wage countries are often forgetting that New New Trade Theory (i.e., the Melitz Model), not present
in the New Trade Theory?
b. Low wage countries have lower productivity.
a. Trade increases average productivity as more productive
6. Anti-dumping laws
firms expand to export.
d. Are being used against the United States today
1. Which of the following would be included as contributing
considerably more than they were fifteen years ago.
positively to the U.S. balance of merchandise trade?
7. The political-economy explanation of why countries have
d. Purchase by the Russian government of wheat from a
positive tariffs, summarized in the phrase “protection for
U.S. grain firm.
sale,” says that
2. The United States in 2011 (the year for which international
a. Legislators provide tariff protection to industries in
transactions were reported in the text) had a surplus in its
response to political campaign contributions.
d. Balance on financial account.
1. Which of the following is not a possible cause of a country
having a comparative advantage in a particular good? 3. If all international transactions were included and
measured accurately, then the statistical discrepancy would
d. An unusually large number of firms producing the good.
be
2. Which of the following is not normally regarded as a
a. Zero.
factor of production?
4. Which of the following would not be included as
c. Money
contributing negatively to the U.S. balance of trade on goods
3. The presence of increasing returns to scale in an industry and services?
tends to
a. Purchase of stock in an Egyptian corporation by a retired
c. Give a comparative advantage in that industry to large school teacher in Flint, Michigan. into Canada.
countries.
5. A surplus in the balance of trade or in the balance on
4. According to the factor proportions model, countries have current account (assume they’re the same for this question)
comparative advantage in the good that implies that

b. Employs a relatively large amount of the factor that they c. The country is lending to foreigners more than foreigners
have relatively more of than other countries. are lending to it.

d
6. The textbook reports the US current account with a deficit 6. Suppose that Australia and Brazil have the outputs per
that became smaller from 2005 to 2009, then rose a bit in worker in producing sleds and clarinets shown in the table at
2010 and 2011. What has happened to it since then? the right. Then Brazil has a

b. The deficit fell further in 2012 and 2013. a. Comparative advantage in sleds.

7. What policy does Warren Buffett suggest in order to 7. According to the theory of comparative advantage,
eliminate the U.S. trade deficit? countries gain from trade because

c. Issue Import Certificates to exporters, to be used by d. World output can rise when each country specializes in
importers. what its does relatively best.

8. If international trade takes place as a result of

comparative advantage, it will cause which of the following
effects in the participating countries?

c. The average well-being of people in both countries will

increase.

9. Scholars at MIT recently tested the theory of

comparative advantage. One problem with doing this is
that

b. One cannot observe productivity in industries that are

not producing.

10. Bernhofen and Brown tested the theory of comparative

advantage by looking at data from 19th century Japan. This
allowed them to observe which of the following data that
1. According to the theory of comparative advantage, which would not normally be available?
of the following is not a reason why countries trade?
e. Autarky prices.
e. Exports give a country a political advantage over other
countries that export 11. Clyde Prestowitz, in his assigned reading, cites a study
that measures various costs of US trade with China. Which
2. Which of the following statements would a mercantilist of the following is not one of those costs?
not agree with?
b. The income lost by workers who become unemployed
a. Imports are desirable. that the cost of trade is larger than the study says.)
3. If all prices in one country (country A) are higher than all 12. In the Embargo Act mentioned in the Costinot and
prices in another country (B) when compared at the wage Rodriguez-Clare reading, the US banned trade with
rates that happen to prevail in the two countries, and if the
countries share the same currency, then if the nominal wage a. Britain and France.
rate in country B remains fixed

a. The nominal wage rate in country A will have to fall.

4. According to the theory of comparative advantage, a

country will export a good only if

d. Its cost of producing the good, relative to other goods, is

at least as low as inother countries.

5. Suppose that Austria and Belgium have the unit labor

requirements for producing steel and brooms shown in the
table at the right. Then

a) Belgium has a comparative advantage

b) in brooms.
c) Austria has a comparative advantage in steel.
d) Austria has an absolute advantage in steel.
e) Belgium has an absolute advantage in brooms.

e. All of the above.