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International Business, 12e (Hill)
Chapter 1 Globalization
1) Since Wally's Whistles is a medium-size business, it wouldn't benefit from globalization.
Answer: FALSE
Explanation: A company does not have to be the size of multinational giants to facilitate, and
benefit from, the globalization of markets. In the United States, for example, according to the
International Trade Administration, more than 300,000 small and medium-size firms with fewer
than 500 employees exported in 2017, accounting for 98 percent of the companies that exported
that year.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
2) Globalization of production can help companies lower their overall cost structure or improve
the quality or functionality of their product offering.
Answer: TRUE
Explanation: The globalization of production refers to the sourcing of goods and services from
locations around the globe to take advantage of national differences in the cost and quality of
factors of production. By doing this, companies hope to lower their overall cost structure or
improve the quality or functionality of their product offering, thereby allowing them to compete
more effectively.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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3) Johann's business does not make consumer products; therefore, it would not be likely to
participate in global markets.
Answer: FALSE
Explanation: Most global markets currently are not markets for consumer productswhere
national differences in tastes and preferences are still often important enough to act as a brake on
globalizationbut markets for industrial goods and materials that serve a universal need the
world over.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
4) Outsourcing is a process that is limited to manufacturing enterprises.
Answer: FALSE
Explanation: Early outsourcing efforts were primarily confined to manufacturing activities.
Increasingly, however, companies are taking advantage of modern communications technology,
particularly the Internet, to outsource service activities to low-cost producers in other nations.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
5) The World Bank has focused on policing the world trading system and making sure
nation-states adhere to the rules laid down in trade treaties.
Answer: FALSE
Explanation: The World Trade Organization is primarily responsible for policing the world
trading system and making sure nation-states adhere to the rules laid down in trade treaties
signed by WTO member states. The World Bank was set up to promote economic development.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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6) When Cyprus had a financial crisis, it went to the World Bank, known as the lender of last
resort, to bail it out.
Answer: FALSE
Explanation: The IMF was established to maintain order in the international monetary system.
It is often seen as the lender of last resort to nation-states whose economies are in turmoil and
whose currencies are losing value against those of other nations.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
7) One of the UN's central mandates is the promotion of higher standards of living, full
employment, and conditions of economic and social progress and development.
Answer: TRUE
Explanation: Although the UN is perhaps best known for its peacekeeping role, one of the
organization's central mandates is the promotion of higher standards of living, full employment,
and conditions of economic and social progress and developmentall issues that are central to
the creation of a vibrant global economy.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
8) The Uruguay Round, finalized in December 1993, reduced protection for patents, trademarks,
and copyrights.
Answer: FALSE
Explanation: Under the umbrella of GATT, the most recent negotiations to be completed,
known as the Uruguay Round, were finalized in December 1993. The Uruguay Round provided
enhanced protection for patents, trademarks, and copyrights.
Difficulty: 1 Easy
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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9) "Beggar thy neighbor" retaliatory trade policies involved countries progressively lowering
trade barriers against each other, which contributed to the Great Depression of the 1930s.
Answer: FALSE
Explanation: The typical aim of tariffs on imports of manufactured goods was to protect
domestic industries from foreign competition. One consequence, however, was "beggar thy
neighbor" retaliatory trade policies, with countries progressively raising trade barriers against
each other. Ultimately, this depressed world demand and contributed to the Great Depression of
the 1930s.
Difficulty: 1 Easy
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
10) Rivers Inc., a U.S.-based sports apparel manufacturer, sets up a production unit in China to
take advantage of the lower labor costs there. This is an example of foreign direct investment.
Answer: TRUE
Explanation: Foreign direct investment (FDI) occurs when a firm invests resources in business
activities outside its home country.
Difficulty: 2 Medium
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
11) World Bank gives aid of $100 million to Kenya for creating rural health care facilities. This
is an example of foreign direct investment.
Answer: FALSE
Explanation: Foreign direct investment (FDI) occurs when a firm invests resources in business
activities outside its home country.
Difficulty: 2 Medium
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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12) The lowering of barriers to international trade enables firms to view the world, rather than a
single country, as their market.
Answer: TRUE
Explanation: The lowering of barriers to international trade enables firms to view the world,
rather than a single country, as their market.
Difficulty: 1 Easy
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
13) According to WTO data, the volume of world merchandise trade has grown faster than the
world economy since 1950.
Answer: TRUE
Explanation: According to WTO data, the volume of world merchandise trade has grown faster
than the world economy since 1950.
Difficulty: 1 Easy
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
14) The cost of microprocessors continues to fall, while their power increases. This statement
supports the predictions made by Moore's Law.
Answer: TRUE
Explanation: The cost of microprocessors continues to fall, while their power increases (a
phenomenon known as Moore's Law, which predicts that the power of microprocessor
technology doubles and its cost of production falls in half every 18 months).
Difficulty: 1 Easy
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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15) Foreign direct investment by non-U.S. firms increased because they wanted to disperse
production activities to optimal locations and to build a direct presence in major foreign markets.
Answer: TRUE
Explanation: As the barriers to the free flow of goods, services, and capital fell, and as other
countries increased their shares of world output, non-U.S. firms increasingly began to invest
across national borders. The motivation for much of this foreign direct investment by non-U.S.
firms was the desire to disperse production activities to optimal locations and to build a direct
presence in major foreign markets.
Difficulty: 2 Medium
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
16) A current trend in international business is the decline of medium-sized and small
multinationals, known as mini-multinationals.
Answer: FALSE
Explanation: Since the 1960s, two notable trends in the demographics of the multinational
enterprise have been (1) the rise of non-U.S. multinationals and (2) the growth of
mini-multinationals.
Difficulty: 1 Easy
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
17) The globalization of the world economy has resulted in a relative increase in the dominance
of U.S. firms in the global marketplace.
Answer: FALSE
Explanation: By 2017, some 27 percent, or 540 firms, of the Top 2000 global firms are now
U.S. multinationals, a drop of 236 firms in only about a decade and a half. Japanese and U.K.
firms also saw declines in inclusion among the Top 2000 firms in the world. The globalization of
the world economy has resulted in a relative decline in the dominance of U.S. firms in the global
marketplace
Difficulty: 1 Easy
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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18) Because Russia has shown signs of shifting back toward greater state involvement in
economic activity and authoritarian government, doing business in Russia is considered risky.
Answer: TRUE
Explanation: Disturbing signs of growing unrest and totalitarian tendencies continue to be seen
in several Eastern European and Central Asian states, including Russia, which has shown signs
of shifting back toward greater state involvement in economic activity and authoritarian
government. Thus, the risks involved in doing business in such countries are high, but so may be
the returns.
Difficulty: 1 Easy
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
19) According to globalization critics, the decline in unskilled wage rates is due to the migration
of low-wage manufacturing jobs offshore and a corresponding reduction in demand for unskilled
workers.
Answer: TRUE
Explanation: Globalization critics argue that the decline in unskilled wage rates is due to the
migration of low-wage manufacturing jobs offshore and a corresponding reduction in demand for
unskilled workers.
Difficulty: 1 Easy
Topic: The Globalization Debate
Learning Objective: 01-04 Explain the main arguments in the debate over the impact of
globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
20) Evidence suggests that technological change has had a bigger impact than globalization on
the declining share of national income enjoyed by unskilled labor.
Answer: TRUE
Explanation: Evidence suggests that technological change has had a bigger impact than
globalization on the declining share of national income enjoyed by unskilled labor.
Difficulty: 1 Easy
Topic: The Globalization Debate
Learning Objective: 01-04 Explain the main arguments in the debate over the impact of
globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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21) According to supporters of free trade, as countries get richer they commit greater violation of
environmental and labor regulations.
Answer: FALSE
Explanation: Supporters of free trade and greater globalization argue that tougher
environmental regulations and stricter labor standards go hand in hand with economic progress.
In general, as countries get richer, they enact tougher environmental and labor regulations.
Difficulty: 1 Easy
Topic: The Globalization Debate
Learning Objective: 01-04 Explain the main arguments in the debate over the impact of
globalization.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
22) According to critics of globalization, today's interdependent global economy limits a nation's
national sovereignty.
Answer: TRUE
Explanation: A concern voiced by critics of globalization is that today's increasingly
interdependent global economy shifts economic power away from national governments and
toward supranational organizations such as the World Trade Organization, the European Union,
and the United Nations.
Difficulty: 1 Easy
Topic: The Globalization Debate
Learning Objective: 01-04 Explain the main arguments in the debate over the impact of
globalization.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
23) According to supporters of debt relief, new democratic governments in poor nations should
not be forced to honor debts incurred by corrupt and dictatorial predecessors.
Answer: TRUE
Explanation: Supporters of debt relief argue that new democratic governments in poor nations
should not be forced to honor debts that were incurred and mismanaged long ago by their corrupt
and dictatorial predecessors.
Difficulty: 1 Easy
Topic: The Globalization Debate
Learning Objective: 01-04 Explain the main arguments in the debate over the impact of
globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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24) A firm needs to become a multinational enterprise to engage in international business.
Answer: FALSE
Explanation: An international business is any firm that engages in international trade or
investment. A firm does not have to become a multinational enterprise, investing directly in
operations in other countries, to engage in international business, although multinational
enterprises are international businesses.
Difficulty: 2 Medium
Topic: Challenges and Opportunities Created by Globalization
Learning Objective: 01-05 Understand how the process of globalization is creating
opportunities and challenges for business managers.
Bloom's: Analyze
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
25) Managing an international business is quite similar to managing a domestic business.
Answer: FALSE
Explanation: International business differs from domestic business because of the greater
complexity of managing an international business. In addition to the problems that arise from the
differences between countries, a manager in an international business is confronted with a range
of other issues that the manager in a domestic business never confronts.
Difficulty: 2 Medium
Topic: Understanding the Differences Between International and Domestic Business
Learning Objective: 01-05 Understand how the process of globalization is creating
opportunities and challenges for business managers.
Bloom's: Analyze
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
26) ________ refers to the shift toward a more integrated and interdependent world economy
A) Outsourcing
B) International marketing
C) Privatization
D) Globalization
Answer: D
Explanation: This is the definition of globalization.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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27) In 2008 and 2009, the ________ became the forum through which major nations attempted
to launch a coordinated policy response to the global financial crisis, which started in America.
A) GATT
B) Group of Ten (G20)
C) Group of Twenty (G20)
D) World Trade Organization
Answer: C
Explanation: Originally, the G20 was established to formulate a coordinated policy response to
financial crises in developing nations. In 2008 and 2009, it became the forum through which
major nations attempted to launch a coordinated policy response to the global financial crisis that
started in America and then rapidly spread around the world.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
28) The Uruguay Round provided
A) reduced protection for patents, trademarks, and copyrights.
B) enhanced protection for patents, trademarks, and copyrights.
C) increased trade barriers.
D) reduced coverage of services and manufactured goods.
Answer: B
Explanation: Under the umbrella of GATT, the most recent negotiations to be completed,
known as the Uruguay Round, were finalized in December 1993. The Uruguay Round provided
enhanced protection for patents, trademarks, and copyrights.
Difficulty: 2 Medium
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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29) Since the collapse of communism over a quarter of a century ago, formerly communist
nations have transformed their economies by globalizing their markets. This involves
A) regulating markets.
B) privatizing state-owned enterprises.
C) decreasing competition.
D) reducing foreign investment.
Answer: B
Explanation: Since the collapse of communism over a quarter of a century ago, the pendulum
of public policy in nation after nation has swung toward the free market end of the economic
spectrum. Regulatory and administrative barriers to doing business in foreign nations have been
reduced, while those nations have often transformed their economies, privatizing state-owned
enterprises, deregulating markets, increasing competition, and welcoming investment by foreign
businesses.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
30) Which of the following is a consequence of globalization?
A) decreasing interdependence between national economies
B) increasing outsourcing of services
C) differentiating of material culture
D) increasing barriers to cross-border trade
Answer: B
Explanation: The process of outsourcing legal services from developed nations to lower-cost
locations is indicative of what is occurring in today's global economy. Because of rapid advances
in telecommunications and the removal of barriers to cross-border trade and investment, such
outsourcing is becoming increasingly common.
Difficulty: 2 Medium
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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31) Which of the following factors hinders globalization of consumer goods market?
A) national differences in tastes and preferences
B) higher production costs in developed nations
C) homogenization of material culture
D) increased outsourcing of goods and services
Answer: A
Explanation: The most global markets currently are not markets for consumer productswhere
national differences in tastes and preferences are still often important enough to act as a brake on
globalizationbut markets for industrial goods and materials that serve a universal need the
world over.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Analyze
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
32) Globalization of markets results in markets becoming
A) more interdependent.
B) less diverse.
C) more protected.
D) less competitive.
Answer: B
Explanation: As markets become global, greater uniformity replaces diversity. In an increasing
number of industries, it is no longer meaningful to talk about "the German market," "the
American market," "the Brazilian market," or "the Japanese market"; for many firms there is
only the global market.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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33) A U.S. investment firm set up a customer service call center in India to take advantage of
lower labor costs. This is called
A) homogenizing markets.
B) vertical integration.
C) outsourcing.
D) horizontal integration.
Answer: C
Explanation: Early outsourcing efforts were primarily confined to manufacturing activities;
increasingly, however, companies are taking advantage of modern communications technology,
particularly the Internet, to outsource service activities to low-cost producers in other nations.
Difficulty: 3 Hard
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
34) Early outsourcing efforts were primarily confined to
A) health care.
B) service activities.
C) technological research.
D) manufacturing activities.
Answer: D
Explanation: Early outsourcing efforts were primarily confined to manufacturing activities;
increasingly, however, companies are taking advantage of modern communications technology,
particularly the Internet, to outsource service activities to low-cost producers in other nations.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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35) What impedes firms from achieving the optimal dispersion of their productive activities to
locations around the globe?
A) transportation costs
B) government deregulations
C) reduction of barriers to trade between countries
D) reduction of barriers to foreign direct investment
Answer: A
Explanation: Substantial impediments still make it difficult for firms to achieve the optimal
dispersion of their productive activities to locations around the globe. These impediments
include formal and informal barriers to trade between countries, barriers to foreign direct
investment, transportation costs, and issues associated with economic and political risk.
Difficulty: 2 Medium
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
36) The General Agreement on Tariffs and Trade (GATT) was responsible for
A) protecting government-owned enterprises.
B) policing the global marketplace.
C) limiting nuclear testing.
D) promoting environment friendly technology.
Answer: B
Explanation: As markets globalize and an increasing proportion of business activity transcends
national borders, institutions are needed to help manage, regulate, and police the global
marketplace, and to promote the establishment of multinational treaties to govern the global
business system. Over the past half century, a number of important global institutions have been
created to help perform these functions, including the General Agreement on Tariffs and Trade
(GATT).
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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37) The ________ is primarily responsible for policing the world trading system and making
sure nation-states adhere to the rules laid down in trade treaties signed by member states.
A) International Development Association
B) World Bank
C) International Court of justice
D) World Trade Organization
Answer: D
Explanation: The World Trade Organization is primarily responsible for policing the world
trading system and making sure nation-states adhere to the rules laid down in trade treaties
signed by WTO member states. As of 2011, 154 nations that collectively accounted for 97
percent of world trade were WTO members, thereby giving the organization enormous scope and
influence.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
38) The World Trade Organization promotes
A) the lowering of barriers to cross-border trade and investment.
B) the development of poor nations through low-interest loans.
C) state ownership of major enterprises.
D) the regulation of national economies.
Answer: A
Explanation: The WTO is also responsible for facilitating the establishment of additional
multinational agreements between WTO member states. Over its entire history, and that of the
GATT before it, the WTO has promoted the lowering of barriers to cross-border trade and
investment.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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39) What is true about the International Monetary Fund?
A) It is primarily responsible for policing the world trading system.
B) It is seen as the lender of last resort to nation-states whose economies are in turmoil.
C) It is responsible for establishing multinational treaties to govern the global business system.
D) It was established to formulate a coordinated policy response to financial crises in developing
nations.
Answer: B
Explanation: The IMF is often seen as the lender of last resort to nation-states whose
economies are in turmoil and whose currencies are losing value against those of other nations.
During the past two decades, for example, the IMF has lent money to the governments of
troubled states, including Argentina, Indonesia, Mexico, Russia, South Korea, Thailand, and
Turkey.
Difficulty: 2 Medium
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Analyze
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
40) The ________ was established on October 24, 1945, by 51 countries committed to
preserving peace through international cooperation and collective security.
A) World Trade Organization
B) United Nations
C) G20
D) World Bank
Answer: B
Explanation: The United Nations was established on October 24, 1945, by 51 countries
committed to preserving peace through international cooperation and collective security. Today
nearly every nation in the world belongs to the United Nations; membership now totals 191
countries.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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41) The G20 was originally established to
A) preserve peace through international cooperation and collective security.
B) maintain order in the international monetary system.
C) formulate a coordinated policy response to financial crises in developing nations.
D) manage, regulate, and police the global marketplace.
Answer: C
Explanation: The G20 was established in 1999 to formulate a coordinated policy response to
financial crises in developing nations. The G20 comprises the finance ministers and central bank
governors of the 19 largest economies in the world, plus representatives from the European
Union and the European Central Bank.
Difficulty: 1 Easy
Topic: What Is Globalization?
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
42) Which of the following is a factor of production?
A) tariffs
B) transportation costs
C) capital
D) government
Answer: C
Explanation: The factors of production are labor, energy, land, and capital.
Difficulty: 1 Easy
Topic: Drivers of Globalization
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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43) Which of the following focuses on making low-interest loans to cash-strapped governments
in poor nations that wish to undertake significant infrastructure investments?
A) the WTO
B) the GATT
C) the World Bank
D) the IMF
Answer: C
Explanation: The World Bank was set up to promote economic development. It has focused on
making low-interest loans to cash-strapped governments in poor nations that wish to undertake
significant infrastructure investments (such as building dams or roads).
Difficulty: 1 Easy
Topic: Drivers of Globalization
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
44) Which of the following was established to maintain order in the international monetary
system?
A) the WTO
B) the GATT
C) the World Bank
D) the IMF
Answer: D
Explanation: The IMF was established to maintain order in the international monetary system.
Difficulty: 1 Easy
Topic: Drivers of Globalization
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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45) Which of the following is true of the IMF?
A) It is often seen as the lender of first choice to nation-states whose economies are in turmoil.
B) Its loans come with no strings attached.
C) It is the less controversial of the two sister institutions, the IMF and the World Bank.
D) It has emerged as a significant player in the global economy.
Answer: D
Explanation: The IMF was established to maintain order in the international monetary system
and has emerged as a significant player in the global economy. The World Bank is the less
controversial of the two sister institutions. The IMF is often seen as the lender of last resort to
nation-states whose economies are in turmoil and whose currencies are losing value against those
of other nations. In return for loans, the IMF requires nation-states to adopt specific economic
policies.
Difficulty: 2 Medium
Topic: Drivers of Globalization
Learning Objective: 01-01 Understand what is meant by the term globalization.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
46) The volume of world trade in merchandise is growing faster than world GDP. This implies
that
A) more firms are dispersing their production processes to global locations.
B) the economies of the world's nation-states are becoming more independent from each other.
C) the global economy is headed for a large downward correction.
D) the world is becoming poorer.
Answer: A
Explanation: The fact that the volume of world trade has been growing faster than world GDP
implies several things. First, more firms are dispersing parts of their production process to
different locations around the globe. Second, the economies of the world's nation-states are
becoming ever more intertwined. As trade expands, nations are becoming increasingly dependent
on each other for important goods and services. Third, the world has become significantly
wealthier in the last two decades. The implication is that rising trade is the engine that has helped
pull the global economy along.
Difficulty: 2 Medium
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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written consent of McGraw-Hill Education.
47) ________ occurs when a firm exports goods or services to consumers in another country.
A) International trade
B) Foreign direct investment
C) Inward investment
D) Outsourcing
Answer: A
Explanation: International trade occurs when a firm exports goods or services to consumers in
another country.
Difficulty: 1 Easy
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
48) In 2009, the financial crisis in the United States was triggered by
A) the global hike in the price of crude oil.
B) the slowdown in U.S. imports, due to political pressure.
C) liberal lending policies by U.S. banks to homeowners.
D) the artificial fixing of the currency rate by China.
Answer: C
Explanation: In 2009, the financial crisis in the United States was triggered by the financial
sector of America, where banks had been too liberal in their lending policies to homeowners,
swept around the world and plunged the global economy into its deepest recession since the early
1980s, illustrating once more that in an interconnected world a severe crisis in one region can
affect the entire globe.
Difficulty: 2 Medium
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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written consent of McGraw-Hill Education.
49) ________ predicts that the power of microprocessor technology doubles and its cost of
production falls in half every 18 months.
A) Keynes's Law
B) Say's Law
C) Moore's Law
D) Sullivan Principle
Answer: C
Explanation: Moore's Law predicts that the power of microprocessor technology doubles and
its cost of production falls in half every 18 months.
Difficulty: 1 Easy
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
50) Containerization allows
A) reduction of the time needed to get from one location to another.
B) simplification of transshipment from one mode of transport to another.
C) buyers and sellers to find each other easily in a global economy.
D) enterprises to coordinate and control a globally dispersed production system.
Answer: B
Explanation: The introduction of containerization simplifies transshipment from one mode of
transport to another. Before the advent of containerization, moving goods from one mode of
transport to another was very labor intensive, lengthy, and costly.
Difficulty: 1 Easy
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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written consent of McGraw-Hill Education.
51) The average tariff rates for manufactured goods have fallen significantly since 1950, and
now stand at about
A) 18 percent.
B) 5.9 percent.
C) 4.8 percent.
D) 1.6 percent.
Answer: D
Explanation: The impact of GATT agreements on average tariff rates for manufactured goods
is that average tariff rates have fallen significantly since 1950 and now stand at about 1.6
percent.
Difficulty: 1 Easy
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
52) The volume of world trade in merchandised goods has been
A) growing at the same rate as world GDP.
B) growing faster than world GDP.
C) growing slower than world GDP.
D) declining faster than world GDP.
Answer: B
Explanation: According to WTO, the volume of world trade in merchandised goods has grown
consistently faster than the growth rate in the world economy since 1950.
Difficulty: 1 Easy
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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written consent of McGraw-Hill Education.
53) The growth of international trade in service activities has been driven by advances in
A) communications.
B) transportation.
C) agriculture.
D) energy.
Answer: A
Explanation: Increasingly, international trade in services has been driven by advances in
communications, which allow corporations to outsource service activities to different locations
around the globe.
Difficulty: 1 Easy
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
54) ABC Global has decided to invest resources in business activities outside its home
country. This is called
A) foreign direct investment (FDI).
B) direct international investment (DII).
C) international trade (IT).
D) foreign direct production (FDP).
Answer: A
Explanation: Foreign direct investment (FDI) occurs when a firm invests resources in business
activities outside its home country.
Difficulty: 2 Medium
Topic: Drivers of Globalization
Learning Objective: 01-02 Recognize the main drivers of globalization.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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written consent of McGraw-Hill Education.
55) The relative decline of the United States in the share of world output and world exports
reflects
A) an increase in the barriers to foreign trade in the United States.
B) the deepening of the global financial crisis.
C) the reduced industrialization in developing nations.
D) the growth in the economic development of the world economy.
Answer: D
Explanation: The relative decline of the United States reflects the growing economic
development and industrialization of the world economy, as opposed to any absolute decline in
the health of the U.S. economy.
Difficulty: 2 Medium
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
56) Why did many Japanese firms invest in North America and Europe in the 1970s?
A) to avoid a highly competitive domestic market
B) to exploit high domestic tariff barriers
C) to provide a hedge against unfavorable currency movements
D) to take advantage of low labor costs
Answer: C
Explanation: Beginning in the 1970s, European and Japanese firms began to shift
labor-intensive manufacturing operations from their home markets to developing nations where
labor costs were lower. In addition, many Japanese firms invested in North America and
Europeoften as a hedge against unfavorable currency movements and the possible imposition
of trade barriers.
Difficulty: 2 Medium
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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written consent of McGraw-Hill Education.
57) The total cumulative value of foreign investments is best referred to as
A) accumulation of foreign shares.
B) portfolio investments.
C) stock of foreign direct investments.
D) stock market investments.
Answer: C
Explanation: The stock of foreign direct investment refers to the total cumulative value of
foreign investments as a percentage of the country's GDP.
Difficulty: 1 Easy
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
58) Throughout the 1990s, the amount of foreign direct investment directed at both developed
and developing nations increased dramatically. This trend reflects
A) a slowdown in global economic activity.
B) the increasing share of the United States in the total FDI stock.
C) the decline in cross-border flows of foreign direct investment.
D) the increasing internationalization of business corporations.
Answer: D
Explanation: Throughout the 1990s, the amount of investment directed at both developed and
developing nations increased dramatically, a trend that reflects the increasing internationalization
of business corporations.
Difficulty: 2 Medium
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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written consent of McGraw-Hill Education.
59) Which of the following countries has been the largest recipient of foreign direct investment
and, in 2016, received a record $249.8 billion in inflows?
A) Brazil
B) Russia
C) India
D) China
Answer: D
Explanation: Among developing nations, the largest recipient of foreign direct investment has
been China, which in 2016 received a record $249.8 billion in inflows.
Difficulty: 1 Easy
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
60) Toyota is a multinational enterprise (MNE), which is a firm that
A) exports its products to multiple countries.
B) has production activities in more than two countries.
C) does most of its business on the Internet.
D) lists its securities on a public exchange.
Answer: B
Explanation: A multinational enterprise (MNE) is any business that has productive activities in
two or more countries.
Difficulty: 1 Easy
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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written consent of McGraw-Hill Education.
61) Since the 1960s, which of the following has been a notable trend in the demographics of the
multinational enterprise?
A) the decline of multinational companies in the manufacturing sector
B) the growth of government-owned multinational enterprises
C) the decline of non-U.S. multinationals
D) the growth of mini-multinationals
Answer: D
Explanation: Since the 1960s, two notable trends in the demographics of the multinational
enterprise have been (1) the rise of non-U.S. multinationals and (2) the growth of
mini-multinationals.
Difficulty: 1 Easy
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
62) In the last two decades, Latin American countries such as Brazil, Mexico, and Chile have
A) embraced communist principles.
B) promoted government ownership of enterprises.
C) experienced increasing debt and inflation.
D) welcomed foreign investment.
Answer: D
Explanation: In the past two decades, throughout most of Latin America, debt and inflation are
down, governments have sold state-owned enterprises to private investors, foreign investment is
welcomed, and the region's economies have expanded. Brazil, Mexico, and Chile have led the
way.
Difficulty: 1 Easy
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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written consent of McGraw-Hill Education.
63) Which of the following is a risk associated with globalization?
A) restrictions on competition
B) global financial contagion
C) excessive market regulation
D) differentiation of markets
Answer: B
Explanation: Greater globalization brings with it risks of its own. The opportunities for doing
business in a global economy may be significantly enhanced; however, the risks associated with
global financial contagion are also greater.
Difficulty: 2 Medium
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
64) The rise in the number of mini-multinationals means that
A) small businesses are becoming increasingly involved in international trade and investment.
B) it is increasingly difficult to enter the large multinational market.
C) countries are working together to minimize MNE influence.
D) there is greater state involvement in industry.
Answer: A
Explanation: Although most international trade and investment are still conducted by large
firms, many medium-size and small businesses are becoming increasingly involved in
international trade and investment.
Difficulty: 2 Medium
Topic: The Changing Nature of the Global Economy
Learning Objective: 01-03 Describe the changing nature of the global economy.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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