1.

Into which category of multinational is IBM most likely to fall? a. raw materials seeker b. market seeker c. cost minimizer d. all of the above ANSWER: b: market seeker 2. Which decade? a. b. c. d. ANSWER: 3. one of the following accelerated the growth of the global economy in the past the U.S.-Canada-Mexico free-trade pact the creation of the European Union Chinas entrance into the WTO All of the above d: Consequences of Global Competition

The multinational financial system enables companies to a. avoid currency controls b. reduce taxes c. access lower cost financing sources d. all of the above ANSWER: d: rise of the multinational 4. Given the added risks associated with doing business abroad, companies should a. limit their foreign sales to less than 40% of total sales b. limit their foreign assets to less than 30% of total assets c. avoid foreign markets altogether unless they can earn a return in excess of the return they earn in their domestic market d. invest in developed countries only and avoid Third World nations e. none of the above ANSWER: e: the internationalization of business

5.

Which of the following is an example of reverse foreign investment? a. Honda builds a factory in Ohio b. Apple builds a plant in Ireland that exports to the United States c. British Telecom issues new stock in the United States d. American investors buy shares in Sony ANSWER: a: market seeker 6. Which of the following is a failing of the theory of comparative advantage? a. it ignores the role of uncertainty and economies of scale b. it assumes that factors of production are immobile c. it assumes that there are no differentiated products d. all of the above ANSWER: d: rise of the multinational

7.

Which of the following theories identifies specialization as the main reason for international business activity? a. product life cycle theory of international trade b. theory of diversification c. doctrine of comparative advantage d. theory of globalization ANSWER: c: rise of the multinational 8. Critics of the multinational corporation would not fault its tendency to a. shift production from one location to another in search of lower costs b. avoid taxes c. cause balance of payments difficulties d. engage in environmental protection measures ANSWER: d: criticisms of the MNC

9.

______ is another name for the complete replacement of the local currency with the U.S. dollar. a. Seignorage b. Dollarization c. Depreciation d. Appreciation ANSWER: b: Dollarization 10 To some U.S. manufacturers and labor unions, a cheap yuan value gives Chinas __________ an unfair advantage in the global economy. a. imports b. subsidies c. bankers d. exporters ANSWER: d: Mini-Case: A Yen for Yuan

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The asset market view of exchange rate determination says that the spot rate a. should follow a random walk b. is affected primarily by a nation's long-run economic prospects c. should be strongly affected by a nation's balance of trade d. both a and b ANSWER: d: Expectations and the Asset Market Model of Exchange Rates

12.

Most currency transactions are channeled through the worldwide ________ market which accounts for _______ of foreign exchange transactions. a. stock, 50% b. interbank, 50% c. interbank, 95% d. internet, 30% ANSWER: c: organization of the foreign exchange market 13. The overwhelming majority of foreign exchange transactions involve a. multinational corporations buying and selling foreign exchange b. importers and exporters buying and selling foreign exchange c. banks buying and selling foreign exchange d. governments buying and selling foreign exchange ANSWER: c: the participants 14. The world's largest currency trading market is a. New York b. Frankfurt c. Tokyo d. London ANSWER: d: size

Trading on the foreign exchange market is

a. b. c. d. ANSWER: located in a physical headquarters in London takes place within an organized exchange conducted by licensed brokers from the London stock exchange an electronically linked network of banks, brokers, and dealers d: organization Traders on the foreign exchange market use ___________ to eliminate or cover the risk of loss on export or import orders denominated in foreign currencies. currency options forward contracts money-market hedges currency futures contracts b: the participants
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a. b. c. d. ANSWER: