Business Foundations O C Ferrell 12th Edition – Test Bank
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Sample Test
Business Foundations: A Changing World, 12e (Ferrell)
Chapter 3 Business in a Borderless World
1) International business involves the buying, selling, and
trading of goods and services across national boundaries.
Answer: TRUE
Explanation: International business refers to the buying,
selling, and trading of goods and services across national boundaries.
Difficulty: 1 Easy
Topic: Definition of Business
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
2) Nations trade with other nations to obtain resources that
would otherwise be unavailable to them.
Answer: TRUE
Explanation: Nations and businesses engage in
international trade to obtain raw materials and goods that are otherwise
unavailable to them or are available elsewhere at a lower price than that at
which they themselves can produce.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
3) Fit Rite Fasteners, a firm based in the United States, buys
metal parts from China to manufacture its fasteners. In doing so, the company
is engaged in exporting.
Answer: FALSE
Explanation: Importing is the purchase of goods and
services from foreign sources.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
4) When a nation imports more than it exports, it has a positive
balance of trade.
Answer: FALSE
Explanation: When a nation imports more than it exports,
it has a negative balance of trade, or trade deficit.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
5) Trade deficits can help businesses succeed, create more jobs,
and improve the standard of living.
Answer: FALSE
Explanation: Trade deficits are harmful because they can
mean the failure of businesses, the loss of jobs, and a lowered standard of
living.
Difficulty: 3 Hard
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
6) A business that is engaging in importing and exporting must
be familiar with the ratio at which one nation’s currency can be exchanged for
another. In other words, the business must be familiar with the balance of
trade.
Answer: FALSE
Explanation: The business must be familiar with the
exchange rate which is the ratio at which one nation’s currency can be
exchanged for another. Familiarity with exchange rates is important because
they affect the cost of imports and exports.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
7) A common reason for establishing quotas or tariffs is to
encourage dumping.
Answer: FALSE
Explanation: One common reason for setting quotas or
tariffs is to prohibit dumping, which occurs when a country or business sells
products at less than what it costs to produce them.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
8) Political unrest in countries often creates a hostile
environment for foreign businesses and can act as a barrier to international
trade.
Answer: TRUE
Explanation: Businesses engaged in international trade
must consider the relative stability of countries. Political unrest in
countries may create a hostile or even dangerous environment for foreign
businesses.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
9) Sociocultural differences, such as variations in body
language and personal space, rarely have an impact on international business.
Answer: FALSE
Explanation: Sociocultural differences, such as variations
in body language and personal space, have an impact on international business.
These cultural differences may generate uncomfortable feelings or
misunderstandings when business people of different countries negotiate with
each other.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
10) The General Agreement on Tariffs and Trade (GATT) provided a
forum for tariff negotiations and a place where international trade problems
could be resolved.
Answer: TRUE
Explanation: Originally signed by 23 nations in 1947, the
General Agreement on Tariffs and Trade provided a forum for tariff negotiations
and a place where international trade problems could be discussed and resolved.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
11) The World Trade Organization agreements were rejected by
most of the world’s trading nations.
Answer: FALSE
Explanation: Key to the World Trade Organization are the
WTO agreements, which are the legal ground rules for international commerce.
The agreements were negotiated and signed by most of the world’s trading
nations and ratified by their parliaments.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
12) Many U.S. companies have taken advantage of Mexico’s low
labor costs and proximity to the United States to set up maquiladoras.
Answer:TRUE
Explanation: As a result of the North American Free Trade
Agreement (NAFTA), many U.S. companies have taken advantage of Mexico’s low
labor costs and proximity to the United States to set up production facilities,
sometimes called maquiladoras.
Difficulty: 2 Medium
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
13) The Asia-Pacific Economic Cooperation (APEC) is a trade
agreement between Asian countries and does not include the United States.
Answer: FALSE
Explanation: The Asia-Pacific Economic Cooperation (APEC),
established in 1989, promotes open trade and economic and technical cooperation
among member economies, which initially included Australia, Brunei Darussalam,
Canada, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines,
Singapore, Thailand, and the United States. Since then, the alliance has grown
to include Chile; China; Hong Kong, China; Mexico; Papua New Guinea; Peru;
Russia; Chinese Taipei; and Vietnam.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
14) The International Monetary Fund promotes trade among member
nations by eliminating trade barriers and fostering financial cooperation.
Answer: TRUE
Explanation: The International Monetary Fund (IMF) was
established in 1947 to promote trade among member nations by eliminating trade
barriers and fostering financial cooperation.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
15) Export agents either purchase products outright or take them
on consignment but are not responsible for storage and transportation of the
product.
Answer: FALSE
Explanation: Export agents either purchase products outright
or take them on consignment. They are also responsible for storage and
transportation.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
16) Licensing is a good option for small manufacturers wanting
to launch a well-known brand internationally.
Answer: TRUE
Explanation: Licensing is a trade arrangement in which one
company—the licensor—allows another company—the licensee—to use its company
name, products, patents, brands, trademarks, raw materials, and/or production
processes in exchange for a fee or royalty. Licensing is especially
advantageous for small manufacturers wanting to launch a well-known brand
internationally.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
17) As an international business opportunity, direct investment
provides the least amount of control but is also the least expensive way to
participate in foreign trade.
Answer: FALSE
Explanation: The opposite is true. Companies that want
more control and are willing to invest considerable resources in international
business may consider direct investment, the ownership of overseas facilities.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
18) Multinational corporations (MNCs) are rarely targeted by
activists because they provide so many benefits to the countries in which they
do business.
Answer: FALSE
Explanation: Multinational corporations (MNCs) have been
targeted by anti-globalization activists at global business forums, and some
protests have turned violent. MNCs are criticized on the grounds that they
increase the gap between rich and poor nations, misuse and misallocate scarce
resources, exploit the labor markets in less-developed countries (LDCs), and
harm their natural environments.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
19) Companies doing business internationally have traditionally
used a globalization strategy.
Answer: FALSE
Explanation: Companies doing business internationally have
traditionally used a multinational strategy, customizing their products,
promotion, and distribution according to cultural, technological, regional, and
national differences.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-05 Contrast two basic strategies
used in international business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
20) A global strategy involves standardizing products for the
whole world.
Answer: TRUE
Explanation: A global strategy involves standardizing
products (and, as much as possible, their promotion and distribution) for the
whole world, as if it were a single entity.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-05 Contrast two basic strategies
used in international business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
21) If a company in the United States buys, sells, and trades
goods and services with several other countries, it is engaged in
1. A)
international business.
2. B)
contract manufacturing.
3. C)
outsourcing.
4. D)
direct investment.
5. E)
the balance of trade.
Answer: A
Explanation: International business is the buying,
selling, and trading of goods and services across national boundaries.
Difficulty: 2 Medium
Topic: Definition of Business
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
22) A(n) ________ exists when a country is the most efficient
producer of an item.
1. A)
comparative advantage
2. B) comparative
disadvantage
3. C)
absolute advantage
4. D)
absolute disadvantage
5. E)
domestic advantage
Answer: C
Explanation: Some nations have a monopoly on the
production of a particular resource or product. Such a monopoly, or absolute
advantage, exists when a country is the only source of an item, the only
producer of an item, or the most efficient producer of an item.
Difficulty: 1 Easy
Topic: Competition
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
23) Bolivia, South America is the only country in the world that
is able to grow a rare plant that is used to produce a healing ointment for
arthritis patients. Because Bolivia is the only country with access to this
plant, it has a(n)
1. A)
comparative advantage.
2. B)
comparative disadvantage.
3. C)
absolute advantage.
4. D)
absolute disadvantage.
5. E)
domestic advantage.
Answer: C
Explanation: This is an example of absolute advantage,
which exists when a country is the only source of an item, the only producer of
an item, or the most efficient producer of an item.
Difficulty: 3 Hard
Topic: Competition
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
24) Suppose there are several countries that are efficient at
producing coffee beans and Brazil is one of those countries. While Brazil is
efficient at producing coffee beans, it is inefficient at producing
electronics. Because of this, Brazil sells its coffee beans to other countries
and buys electronics from other
countries. This scenario exemplifies the concept of
1. A)
supply and demand.
2. B)
absolute advantage.
3. C) a
monopoly.
4. D)
exchange controls.
5. E)
comparative advantage.
Answer: E
Explanation: This is an example of comparative advantage,
which occurs when a country specializes in products that it can supply more
efficiently or at a lower cost than it can produce other items.
Difficulty: 3 Hard
Topic: Competition
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
25) ________ is the transferring of manufacturing or other
tasks—such as data processing—to countries where labor and supplies are less
expensive.
1. A)
Importing
2. B)
Exporting
3. C)
Outsourcing
4. D)
Dumping
5. E)
Insourcing
Answer: C
Explanation: Outsourcing is the transferring of
manufacturing or other tasks—such as data processing—to countries where labor
and supplies are less expensive.
Difficulty: 1 Easy
Topic: Competition
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
26) Why has outsourcing become a controversial practice in the
United States?
1. A)
Outsourcing takes away jobs that could be accomplished by workers in the United
States.
2. B)
Outsourcing takes away a company’s ability to develop a comparative advantage.
3. C)
Outsourcing has made U.S.-based products significantly more expensive.
4. D)
Outsourcing increases the cost of labor and supplies needed to get the job
done.
5. E)
The outsourced products end up having sub-standard quality because their
producers lack expertise.
Answer: A
Explanation: Outsourcing has become a controversial
practice in the United States because many jobs have moved overseas where those
tasks can be accomplished for lower costs.
Difficulty: 2 Medium
Topic: Competition
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
27) ________ is best described
as the sale of goods and services to foreign markets.
1. A)
Franchising
2. B) Offshoring
3. C)
Outsourcing
4. D)
Exporting
5. E)
Importing
Answer: D
Explanation: To obtain needed goods and services and the
funds to pay for them, nations trade by exporting and importing. Exporting is
the sale of goods and services to foreign markets.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
28) Ann bought a new shirt from a retailer in the United States.
When she checked the tag, she saw that her shirt was made in Vietnam. This
means her shirt is a(n) ________ good.
1. A)
exported
2. B)
outsourced
3. C)
absolute
4. D)
imported
5. E) domestic
Answer: D
Explanation: This is an example of an imported good.
Importing is the purchase of goods and services from foreign sources.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
29) A nation’s ________ is defined as the difference in value
between its exports and imports.
1. A)
balance of import
2. B)
balance of export
3. C)
balance of trade
4. D)
trade surplus
5. E)
trade deficit
Answer: C
Explanation: A nation’s balance of trade is the difference
in value between its exports and imports.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
30) U.S. exports to China have been rapidly increasing but not
fast enough to offset the imports from China. This means that the United States
has a(n)
1. A)
domestic gain.
2. B)
trade surplus.
3. C)
trade deficit.
4. D)
absolute advantage.
5. E)
comparative advantage.
Answer: C
Explanation: U.S. exports to China have been rapidly
increasing but not fast enough to offset the imports from China, meaning that
the United States has a trade deficit. A trade deficit is defined as a nation’s
negative balance of trade, which exists when that country imports more products
than it exports.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
31) One of the outcomes of a country continually operating with
a trade deficit is
1. A) an
increase in successful businesses.
2. B) an
increase in the number of exported products.
3. C) an
increase in unemployment.
4. D) a
decrease in the number of imported products.
5. E) a
higher standard of living.
Answer: C
Explanation: A trade deficit is defined as a nation’s
negative balance of trade, which exists when that country imports more products
than it exports. Trade deficits are harmful because they can mean the failure
of businesses, the loss of jobs, and a lowered standard of living.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
32) A favorable balance of trade exists when a country
1. A)
imports more than it exports.
2. B)
exports more than it imports.
3. C)
has more debt liabilities than assets.
4. D)
spends more than it saves.
5. E)
saves more than it spends.
Answer: B
Explanation: When a nation exports more goods than it
imports, it has a favorable balance of trade, or trade surplus.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
33) Until 1970, the United States experienced a trade surplus.
What factor contributed to this surplus?
1. A)
inefficient manufacturing systems
2. B) plentiful
imports from other countries
3. C) a
negative balance of payments
4. D) an
abundance of natural resources
5. E)
healthy economies in other countries
Answer: D
Explanation: Until about 1970, the United States had a
trade surplus due to an abundance of natural resources and the relative
efficiency of its manufacturing systems.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
34) The difference between the flow of money into and out of a
country is called its
1. A)
balance of trade.
2. B)
domestic gain.
3. C)
balance of payments.
4. D)
credit balance.
5. E)
exchange rate.
Answer: C
Explanation: The difference between the flow of money into
and out of a country is called its balance of payments. A country’s balance of
trade, foreign investment, foreign aid, loans, military expenditures, and money
spent by tourists comprise its balance of payments.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
35) If a country imports more goods and services than it
exports, the country most likely has
1. A) a
trade deficit.
2. B) a
favorable balance of trade.
3. C) a
favorable balance of payments.
4. D) a
trade surplus.
5. E)
high production and employment levels.
Answer: A
Explanation: When a country has a trade deficit, it
imports more products than it exports. As a result, more money flows out of the
country than into it. When this happens, the country may experience declining
production and higher unemployment because there is less money available for
spending.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
36) A U.S. firm is considering doing business in a foreign country.
What economic factor
should the business consider regarding the country in which it will conduct its
business?
1. A)
whether the country is part of a cartel
2. B)
any tariffs the country might impose
3. C)
the political climate of the country
4. D)
cultural differences between the two countries
5. E)
the infrastructure of the country
Answer: E
Explanation: Any firm considering international business
must research the other country’s economic, legal, political, social, cultural,
and technological background. The economic factors that should be considered
are the country’s economic development, infrastructure, and exchange rates.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
37) Which statement about less-developed countries (LDCs) is
true?
1. A)
Almost all countries in Europe are LDCs.
2. B) In
LDCs, consumers tend to purchase more nonessential products.
3. C)
LDCs are characterized by solid infrastructures.
4. D)
LDCs represent a potentially huge and profitable market for many businesses.
5. E)
LDCs are characterized by high per-capita income.
Answer: D
Explanation: Many countries in Africa, Asia, and South
America are less economically advanced than those in North America and Europe.
These less-developed countries (LDCs) are characterized by low per-capita
income, which means consumers are less likely to purchase nonessential items.
Nonetheless, LDCs represent a potentially huge and profitable market for many
businesses because they may be buying technology to improve their
infrastructures, and much of the population may desire consumer products.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
38) Physical facilities such as railroads, highways, airfields,
hospitals, and distribution systems all support a country’s economic activities
and are referred to as the country’s
1. A)
absolute advantage.
2. B)
strategic alliance.
3. C)
infrastructure.
4. D)
exchange rate.
5. E)
exchange controls.
Answer: C
Explanation: A country’s level of development is
determined in part by its infrastructure, the physical facilities that support
its economic activities, such as railroads, highways, ports, airfields,
utilities and power plants, schools, hospitals, communication systems, and
commercial and distribution systems.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
39) The ratio at which one nation’s currency can be exchanged
for another nation’s currency is referred to as the
1. A)
exchange rate.
2. B)
balance of payments.
3. C)
trade ratio.
4. D)
value ratio.
5. E)
currency rate.
Answer: A
Explanation: The ratio at which one nation’s currency can
be exchanged for another nation’s currency is the exchange rate.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
40) If the United States were to devalue its currency, the most likely result
would be
1. A) an
increase in foreign tourists to the United States.
2. B) a
decrease in the number of foreign tourists to the United States.
3. C) a
decrease in the sale of domestic goods.
4. D) an
increase in its imports.
5. E) an
increase in the cost of American goods abroad.
Answer: A
Explanation: Devaluation decreases the value of currency
in relation to other currencies. Devaluation encourages the sale of domestic
goods and tourism.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
41) Which situation encourages the sale of domestic goods and
tourism?
1. A)
inflation
2. B)
dumping
3. C)
outsourcing
4. D)
devaluation
5. E)
tariffs
Answer: D
Explanation: Devaluation decreases the value of currency
in relation to other currencies. If the U.S. government were to devalue the
dollar, it would lower the cost of American goods abroad and make trips to the
United States less expensive for foreign tourists. Thus, devaluation encourages
the sale of domestic goods and tourism.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
42) Which statement is true about barriers to international
business?
1. A)
Devaluation discourages the sale of domestic goods and tourism.
2. B)
Revaluations occur daily because of the daily changes in exchange rates.
3. C)
Legal and ethical requirements for successful business are decreasing globally.
4. D)
Many of the legal rights that Americans take for granted do not exist in other
countries.
5. E)
Less developed countries resist international trade and therefore are not
profitable markets.
Answer: D
Explanation: Many of the legal rights that Americans take
for granted do not exist in other countries, and a firm doing business abroad
must understand and obey the laws of the host country.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
43) Countries like China and Vietnam are flooded with
counterfeit videos, movies, computer software, furniture, and clothing. Why is
this?
1. A)
The counterfeit products are of better quality.
2. B)
The copyright laws of those countries are strict for domestic products.
3. C)
Those countries do not engage in any trade that is legal.
4. D)
Intellectual property laws in those countries are very strict.
5. E)
Copying is a tradition in those countries.
Answer: E
Explanation: Because copying is a tradition in China and
Vietnam and laws protecting copyrights and intellectual property are weak and
minimally enforced, those countries are flooded with counterfeit videos,
movies, computer software, furniture, and clothing.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
44) A specific amount of money levied on each unit of a product
brought into a country is referred to as a(n) ________ tariff.
1. A) ad
valorem
2. B)
value-added
3. C)
fixed
4. D)
prohibitive
5. E)
zero
Answer: C
Explanation: A fixed tariff is a specific amount of money
levied on each unit of a product brought into a country, while an ad valorem
tariff is based on the value of the item. Most countries allow citizens
traveling abroad to bring home a certain amount of merchandise without paying
an import tariff.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
45) A fixed tariff differs from an ad valorem tariff because an
ad valorem tariff
1. A) is
a specific amount of money levied on each unit of a product sold by a country.
2. B) is
a specific amount of money levied on each unit of a product brought into a
country.
3. C) is
based on the value of an item.
4. D)
prohibits trade in a particular product.
5. E)
limits the number of units of a particular product that can be imported into a
country.
Answer: C
Explanation: A fixed tariff is a specific amount of money
levied on each unit of a product brought into a country, while an ad valorem
tariff is based on the value of an item.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
46) Janie took a vacation to Italy and bought $1,000 worth of
jewelry in Florence. The United States will allow Janie to bring $800 back into
the country duty free. What happens to the other $200 that is part of her total
expenditure?
1. A)
Janie does not have to account for the extra $200; the U.S. government will pay
a duty tax on it.
2. B)
Janie cannot bring home more than $800 worth of goods, so she must return $200
worth of merchandise.
3. C)
Janie must pay an ad valorem tariff on the extra $200.
4. D)
Janie must pay a fixed tariff on the extra $200.
5. E)
Janie must claim the $200 as an export tariff.
Answer: C
Explanation: A U.S. citizen may bring $200, $800, or
$1,600 worth of merchandise into the United States duty free depending on the
country visited. After that, U.S. citizens must pay an ad valorem tariff based
on the cost of the item and the country of origin. Thus, identical items
purchased in different countries might have different tariffs.
Difficulty: 3 Hard
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
47) Which statement is true about tariffs?
1. A)
Countries are not allowed to levy tariffs for political reasons.
2. B)
Protective tariffs allow more expensive domestic goods to compete with foreign
ones.
3. C)
Critics of protective tariffs argue that their use promotes too much free trade
and competition.
4. D)
Supporters of protective tariffs say the tariffs insulate the world economy
from entering into trade wars.
5. E)
Protective tariffs force domestic and foreign products to be sold for the exact
same price.
Answer: B
Explanation: Protective tariffs allow more expensive
domestic goods to compete with foreign ones. For example, because other markets
can produce steel more cheaply than the United States, the U.S. has imposed
tariffs on steel imported into the United States because imports have caused
many local steelworks to crash.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
48) What is the primary purpose of a protective tariff?
1. A) to
allow more expensive domestic goods to compete with foreign ones
2. B) to
completely ban certain goods from entering a country
3. C) to
limit the number of products in a certain category from entering a country
4. D) to
standardize the number of items that can be brought into a country duty free
5. E) to
makeup for variances in currency exchange rates.
Answer: A
Explanation: Import tariffs are commonly imposed to
protect domestic products by raising the price of imported ones. Protective
tariffs allow more expensive domestic goods to compete with foreign ones. Such
protective tariffs have become controversial, as Americans become increasingly
concerned over the U.S. trade deficit.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
49) If Thailand wants to limit the amount of sugar that the
United States imports into its country, it would do so by imposing a(n)
1. A)
quota.
2. B)
value-added tax.
3. C)
export tariff.
4. D)
embargo.
5. E)
subsidy.
Answer: A
Explanation: A quota limits the number of units of a
particular product that can be imported into a country, whereas an embargo
would prohibit the
United States from importing sugar to Thailand.
Difficulty: 3 Hard
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
50) A(n) ________ is best defined as a prohibition on trade in a
particular product.
1. A) ad
valorem tariff
2. B)
excise tax
3. C)
cartel
4. D) quota
5. E)
embargo
Answer: E
Explanation: An embargo prohibits trade in a particular
product.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
51) Because it goes against their religious beliefs, some Muslim
nations forbid the importation of alcoholic beverages into their countries.
This is an example of a(n)
1. A)
trade tariff.
2. B)
trade embargo.
3. C) quota
limit.
4. D)
fixed tariff.
5. E) ad
valorem tariff.
Answer: B
Explanation: An embargo prohibits trade in a particular
product. Embargoes are generally directed at specific goods or countries and
may be established for political, economic, health, or religious reasons. Some
Muslim nations forbid the importation of alcoholic beverages on religious
grounds.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
52) ________ is defined as the act of a country or business
selling products at less than what it costs to produce them.
1. A)
Dumping
2. B)
Offshoring
3. C)
Outsourcing
4. D)
Exporting
5. E)
Importing
Answer: A
Explanation: Dumping is the act of a country or business
selling products at less than what it costs to produce them.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
53) Which statement is true about dumping?
1. A)
Dumping occurs when the country of origin has products with the latest
technology that are in high demand in overseas markets.
2. B)
Dumping occurs when a business sells products at much more than what it costs
to produce them.
3. C)
Dumping occurs when the domestic market for a firm’s product is too big to
match the level of production.
4. D)
Quotas cannot be imposed based on suspicion of dumping unless proven.
5. E)
Dumping permits quick entry into a market.
Answer: E
Explanation: Dumping is the act of a country or business
selling products at less than what it costs to produce them. Dumping permits
quick entry into a market.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
54) All of the following nations have been subject to economic
sanctions for political reasons in recent years EXCEPT
1. A)
the United States.
2. B)
Cuba.
3. C)
Iran.
4. D)
Syria.
5. E)
North Korea.
Answer: A
Explanation: In recent years, Cuba, Iran, Syria, and North
Korea have been subject to economic sanctions for political reasons.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
55) Political concerns may lead a group of nations to form a(n)
________, a group of firms or nations that agrees to act as a monopoly and not
compete with each other.
1. A)
embargo
2. B)
conglomerate
3. C)
joint venture
4. D)
cartel
5. E)
franchise
Answer: D
Explanation: Political concerns may lead a group of
nations to form a cartel, a group of firms or nations that agrees to act as a
monopoly and not compete with each other, to generate a competitive advantage
in world markets. The Organization of Petroleum Exporting Countries (OPEC), the
most famous cartel, was founded in the 1960s to increase the price of petroleum
throughout the world and to maintain high prices in order to enhance the
economies of its member nations.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
56) A country that imposes an embargo in response to some
political event is attempting to
1. A)
restrict trade with other nations.
2. B) increase
trade with other nations.
3. C)
encourage dumping into the country.
4. D)
increase the amount of currency that can be brought into the country.
5. E)
increase the potential for countries to engage in dumping.
Answer: A
Explanation: An embargo prohibits trade in a particular
product. Political considerations affect international business daily as
governments enact tariffs, embargoes, or other types of trade restrictions in
response to political events.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
57) A sudden change in power can result in a regime that is
hostile to foreign investment. This is a primary example of a(n) ________
barrier.
1. A)
political
2. B)
cultural
3. C)
exchange
4. D)
language
5. E)
geographic
Answer: A
Explanation: A sudden change in power can result in a
regime that is hostile to foreign investment. This is a primary example of a
political barrier.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
58) A catastrophic flood crippled a country’s government. In an
effort to help local businesses rebuild, the government forced foreign
businesses out of the country. This is an example of a(n) ________ barrier to
trade.
1. A)
political
2. B)
social
3. C)
economic
4. D)
ethical
5. E)
legal
Answer: A
Explanation: This is an example of a political barrier to
trade. Natural disasters can cripple a country’s government, making the region
unstable. Forcing businesses out of a country altogether is a drastic example
of international politics.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
59) Differences in spoken and written language represent a(n)
________ barrier to international trade.
1. A)
technological
2. B)
political
3. C)
legal
4. D)
cultural
5. E)
economic
Answer: D
Explanation: Cultural differences include differences in
spoken and written language. Although it is certainly possible to translate
words from one language to another, the true meaning is sometimes
misinterpreted or lost.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
60) Understanding that Arab businessmen tend to stand
face-to-face when holding a conversation reveals the importance of
understanding another culture’s use of
1. A)
language.
2. B)
dialect.
3. C)
religious practices.
4. D) ethics.
5. E)
body language.
Answer: E
Explanation: Differences in body language and personal
space affect international trade. Body language is nonverbal, usually
unconscious communication through gestures, posture, and facial expression.
Personal space is the distance at which one person feels comfortable talking to
another. Americans tend to stand a moderate distance away from the person with
whom they are speaking. Arab businessmen tend to stand face-to-face with the
object of their conversation.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
61) At the conclusion of a business meeting in Brazil, David
gave the A-OK sign to the people in the room. This hand gesture in America
means OK, however, the Brazilians were embarrassed because in their culture the
gesture is perceived as rude. This situation exemplifies how even simple
differences in ________ can cause misunderstandings in international
relationships.
1. A)
laws
2. B)
family roles
3. C)
body language
4. D)
gender
5. E)
written language
Answer: C
Explanation: Gestures vary from culture to culture, and
gestures considered acceptable in American society—forming a circle with one’s
index finger and thumb, for example—may be considered rude in others.
Difficulty: 3 Hard
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
62) Schweppes Tonic Water discovered during an ad campaign in
Italy that its name was translated to read “Schweppes Toilet Water.” Effective
translations of product names are an example of a(n) ________ barrier to
international trade.
1. A)
political
2. B)
cultural
3. C)
legal
4. D)
ethical
5. E)
demographic
Answer: B
Explanation: Cultural differences include differences in
spoken and written language. Although it is certainly possible to translate
words from one language to another, the true meaning is sometimes
misinterpreted or lost.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
63) Many countries do not allow children to be used in
advertising. This is an example of a(n) ________ barrier.
1. A)
political
2. B)
cultural
3. C)
economic
4. D)
geographic
5. E)
religious
Answer: B
Explanation: Cultural differences include differences in
spoken and written language, body language, personal space, family roles,
perceptions of time, national and religious holidays, local customs, and
measurement systems. Family roles also influence marketing activities. Many
countries do not allow children to be used in advertising, for example.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
64) Americans value promptness in business meetings, while it is
common in Mexico and Spain for a meeting to start thirty minutes late. This
exemplifies how the perceptions of ________ differ among nations.
1. A)
space
2. B)
time
3. C)
language
4. D) ethics
5. E)
respect
Answer: B
Explanation: The people of other nations quite often have
a different perception of time. Americans value promptness; a business meeting
scheduled for a specific time seldom starts more than a few minutes late. In Mexico
and Spain, however, it is not unusual for a meeting to be delayed half an hour
or more.
Difficulty: 3 Hard
Topic: Barriers to International Trade
Learning Objective: 03-02 Assess some of the economic
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
65) Which statement about the General Agreement on Tariffs and
Trade (GATT) is true?
1. A)
More than 100 nations abided by its rules.
2. B) It
was originally signed by 30 nations in 1947.
3. C) It
sponsored rounds of negotiations aimed at increasing trade restrictions.
4. D)
The Uruguay Round promoted dumping.
5. E)
The most recent round was the Paraguay Round (2001–2005).
Answer: A
Explanation: The General Agreement on Tariffs and Trade
(GATT), originally signed by 23 nations in 1947, provided a forum for tariff
negotiations and a place where international trade problems could be discussed
and resolved. More than 100 nations abided by its rules. GATT sponsored rounds
of negotiations aimed at reducing trade restrictions. The most recent round,
the Uruguay Round, further reduced trade barriers for most products and
provided new rules to prevent dumping.
Difficulty: 2 Medium
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
66) Which of the following is the international organization
based in Geneva, Switzerland, that was created in 1995 by the Uruguay Round of
the General Agreement on Tariffs and Trade (GATT)?
1. A)
the European Union
2. B)
the World Trade Organization
3. C)
the World Bank
4. D)
the Association of Southeast Asian Nations
5. E)
the Asia-Pacific Economic Cooperation
Answer: B
Explanation: The World Trade Organization (WTO), an
international organization dealing with the rules of trade between nations, was
created in 1995 by the Uruguay Round of the General Agreement on Tariffs and
Trade (GATT). Based in Geneva, Switzerland, the WTO has also adopted a
leadership role in negotiating trade disputes among nations.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
67) Which regions were merged into one market by the North
American Free Trade Agreement (NAFTA)?
1. A)
Canada and Alaska
2. B)
Brazil, Mexico, and the United States
3. C)
Chile, Brazil, and the United States
4. D)
Canada, Mexico, and the United States
5. E)
Canada and Chile
Answer: D
Explanation: The North American Free Trade Agreement
(NAFTA) merged Canada, the United States, and Mexico into one market. NAFTA
virtually eliminated all tariffs on goods produced and traded among Canada,
Mexico, and the United States to create a free trade area.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
68) ________ is the single largest trading partner of the United
States.
1. A)
Mexico
2. B)
India
3. C)
China
4. D)
Japan
5. E)
Canada
Answer: E
Explanation: Canada’s nearly 37 million consumers are
relatively affluent, with a per capita GDP of $48,100. Trade between the United
States and Canada totals approximately $580 billion. In fact, Canada is the
single largest trading partner of the United States.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
69) Which statement about the European Union is true?
1. A) It
is trying to create opportunities to trade with South America.
2. B) It
is working toward the creation of a standardized currency.
3. C) It
is striving to impose customs checks within Europe.
4. D) It
is working toward the abolition of import duties.
5. E) It
is trying to increase value-added taxes.
Answer: B
Explanation: The European Union (EU) is a union of
European nations established in 1958 to promote trade among its members and is
one of the largest single markets today. To facilitate free trade among
members, the EU is working toward standardization of business regulations and
requirements, import duties, and value-added taxes; the elimination of customs
checks; and the creation of a standardized currency for use by all members.
Difficulty: 2 Medium
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
70) What is “Brexit”?
1. A)
the new currency adopted by the European Union
2. B)
the United Kingdom’s decision to leave the European Union
3. C) a
set of sanctions imposed on EU members that trade outside of the union
4. D)
the unilateral decision to remove the United Kingdom and France from the union
5. E)
the term used for tariffs the EU has imposed on other nations
Answer: B
Explanation: In 2016, the United Kingdom voted to exit the
European Union. This decision to exit, called “Brexit,” resulted in the value
of the pound falling sharply.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
71) Established in 1989, the international trade alliance
between 21 nations that promotes open trade and economic and technical
cooperation among its member nations is called the
1. A)
General Agreement on Tariffs and Trade (GATT).
2. B) Asia-Pacific
Economic Cooperation (APEC).
3. C)
North American Free Trade Agreement (NAFTA).
4. D)
European Union (EU).
5. E)
Association of Southeast Asian Nations (ASEAN).
Answer: B
Explanation: The Asia-Pacific Economic Cooperation (APEC),
established in 1989, promotes open trade and economic and technical cooperation
among member nations. The 21-member alliance represents approximately 40
percent of the world’s population, 54 percent of the world’s GDP, and nearly 44
percent of global trade.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
72) Which country was a member nation of Asia-Pacific Economic
Cooperation (APEC) when it was established in 1989?
1. A)
Vietnam
2. B)
Japan
3. C)
China
4. D)
Hong Kong
5. E)
Chile
Answer: B
Explanation: The Asia-Pacific Economic Cooperation (APEC),
established in 1989, promotes open trade and economic and technical cooperation
among member economies, which initially included Australia, Brunei Darussalam,
Canada, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines,
Singapore, Thailand, and the United States.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
73) Which statement about the Association of Southeast Asian
Nations (ASEAN) is true?
1. A) It
does not have fully free labor flows between member-nations.
2. B) It
is the most unified of all the trading blocs.
3. C) It
has a common currency.
4. D) It
has a 21-member alliance.
5. E) It
was established in 1989.
Answer: A
Explanation: The Association of Southeast Asian Nations
(ASEAN) was established in 1967 as a 10-member alliance. ASEAN’s goals include
the promotion of free trade, peace, and collaboration between its members;
however, it faces challenges in becoming a unified trade bloc. ASEAN members
are quite different from one another and major conflicts have occurred between
member-nations. Unlike the EU, ASEAN will not have a common currency or fully
free labor flows between member-nations.
Difficulty: 2 Medium
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
74) Which organization was established by the industrialized
nations in 1946 to loan money to underdeveloped and developing countries?
1. A)
the Foreign Credit Insurance Association
2. B)
the Exim Bank
3. C)
the World Bank
4. D)
the World Trade Organization
5. E)
the International Monetary Fund
Answer: C
Explanation: The World Bank, more formally known as the
International Bank for Reconstruction and Development, was established by the
industrialized nations, including the United States, in 1946 to loan money to
underdeveloped and developing countries.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
75) What is true of the World Bank?
1. A) It
funds the member nations of the NAFTA and EU.
2. B) It
provides aid to industrialized nations in times of financial crisis.
3. C) It
acts as a global police force.
4. D) It
finances construction projects in underdeveloped and developing countries.
5. E) It
helps developed nations obtain money to start businesses.
Answer: D
Explanation: The World Bank loans its own funds or borrows
funds from member countries to finance projects ranging from road and factory
construction to the building of medical and educational facilities. The World
Bank and other multilateral development banks are the largest source of advice
and assistance for developing nations.
Difficulty: 2 Medium
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
76) The ________ is the closest thing the world has to an
international central bank.
1. A)
International Monetary Fund
2. B)
World Bank
3. C)
European Union
4. D)
Organization for Economic Cooperation and Development
5. E)
World Trade Organization
Answer: A
Explanation: The International Monetary Fund (IMF) is the
closest thing the world has to an international central bank. If countries get
into financial trouble, they can borrow from the World Bank. However, the
global economic crisis created many challenges for the IMF as it was forced to
significantly increase its loans to both emerging economies and more developed
nations.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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