Deck 4: Economic Development of Nations

Question 1

A country that has recently increased the portion of its national production and exports derived from industrial operations is called a(n)________.

A) newly industrialized country (NIC)
B) developing country
C) emerging market
D) developed country

Answer 1

A

Question 2

Volunteer work and unpaid household work are not included in GNP.

Answer 2

True

Question 3

Barter is an alternative for buyers who lack money needed to pay for exports.

Answer 3

False

Question 4

Which of the following terms refers to the broadest measure of economic development of a country?

A) gross domestic product (GDP)
B) purchasing power parity (PPP)
C) gross national product (GNP)
D) human development index (HDI)

Question 5

The GDP per capita of a country is lower than that of France.If the GDP per capita of the country is adjusted for PPP,the country's revised GDP is higher than that of France.Which of the following is most likely true about the country?

A) The cost of living in the country is higher than that of France.
B) The cost of living in the country is lower than that of France.
C) The cost of living in the country is approximately equal to that of France.
D) The cost of living in the country has increased over the past decade.

Question 6

The ________ of a country is its gross national product divided by its population.

A) GNP per capita
B) GDP per capita
C) purchasing power parity
D) purchasing power

Question 7

Which of the following measures the extent to which a government equitably provides its people with a long and healthy life,an education,and a decent standard of living?

A) category development index
B) gross national product index
C) human development index
D) purchasing power index

Question 8

The GDP per capita of a country is higher than that of Thailand.If the GDP per capita of the country is adjusted for PPP,the country's revised GDP is lower than that of Thailand.Which of the following is most likely true about the country?

A) There are fewer goods available for purchase in the country than in Thailand.
B) The cost to buy everyday goods in the country is approximately the same as in Thailand.
C) It costs less to buy everyday goods in the country than in Thailand.
D) It costs more to buy everyday goods in the country than in Thailand.

Question 9

Gross national income (GNI),the broadest measure of economic activity for a country,is defined as the ________.

A) total of all consumption and investment that takes place in a national economy
B) income generated in one country, regardless of who owns the productive assets
C) total of all economic activity in one country less services, such as government administration, health services, and education
D) income generated by both total domestic production and the international production activities of national companies

Question 10

A company is conducting a research on new markets by comparing countries in terms of their human development index (HDI)scores.The company wishes to expand into a market where individuals experience a very high level of total well-being.Which of the following countries would the company most likely choose?

A) Russia
B) Mexico
C) China
D) Japan

Question 11

The relative ability of two countries' currencies to buy the same basket of goods in those two countries is called ________.

A) gross national product
B) gross domestic product
C) purchasing power
D) purchasing power parity

Question 12

Both GDP and GNP measure a nation's income per person.

Question 13

The human development index (HDI)demonstrates that high national income alone guarantees human progress.

Question 14

Which of the following statements is true of national production?

A) Marketers use GDP or GNP figures to determine whether a country's population is wealthy enough to purchase its products.
B) Per capita numbers provide a detailed picture of development of the entire country.
C) Gross product figures accurately indicate whether a nation's economy is growing or shrinking.
D) Volunteer work and unpaid household work are considered in GDP and GNP.

Question 15

________ is the value of goods and services that can be purchased with one unit of a country's currency.

A) Potential output
B) Gross national product
C) Purchasing power
D) Gross domestic product

Question 16

The concept of purchasing power parity (PPP)must be applied to understand the true value of a currency in its home country.

Question 17

Which of the following is true about economic development of a nation?

A) The purchasing power parity is a poor indicator of a people's total well-being.
B) GDP is a larger figure and includes a nation's income generated from exports, imports, and international operations.
C) Illegal activities such as gambling and black market transactions are considered in GDP and GNP.
D) Using gross product figures to compare production across countries accounts for different cost of living in each country.

Question 18

Which of the following terms is used to refer to the exchange of goods and services for other goods and services instead of money?

A) fiat money
B) letter of credit
C) barter
D) guanxi

Question 19

Nations having the poorest infrastructures and lowest personal incomes are called ________.

A) developed countries
B) newly industrialized countries
C) emerging markets
D) developing countries

Question 20

The measure of the value of production that occurs within a country's borders without regard to whether the production is done by domestic or foreign factors of production is its ________.

A) net national product (NNP)
B) gross national product (GNP)
C) gross domestic product (GDP)
D) gross national income (GNI)

Question 21

Differentiate between GDP and GNP.Briefly discuss the drawbacks of using GDP and GNP as indicators of economic development.

Question 22

________ is the forced transfer of assets from a company to the government with compensation.

A) Expropriation
B) Nationalization
C) Confiscation
D) Localization

Question 23

Which results in a loss of assets,without compensation?

A) repatriation
B) confiscation
C) expropriation
D) inflation

Question 24

Had the government taken over the assets of Global Trading without compensation,and not taken over the assets of any other company,the government's actions would be an example of ________.

A) expropriation
B) nationalization
C) confiscation
D) communism

Question 25

Does greater economic freedom guarantee a higher standard of living? Provide examples of two specific countries to support your answer.

Question 26

What is privatization? What role does it play in economic transition?

Question 27

Economic transition is the process of moving from ________.

A) developed to developing economies
B) centrally planned to free-market economies
C) developed to emerging economies
D) free-market to centrally planned economies

Question 28

________ is the process by which a nation changes its fundamental economic organization and creates new free-market institutions.

A) Central planning
B) Economic transition
C) Industrialization
D) Economic liberalism

Question 29

Nations with the poorest infrastructures and lowest personal incomes are called developing countries.

Question 30

Had the government taken over (with compensation)the assets of Global Trading but not those of any other company,the government's actions would be an example of ________.

A) expropriation
B) nationalization
C) confiscation
D) communism

Question 31

Which of the following is a disadvantage of local requirement laws to foreign companies?

A) They do not foster local business activity and increase regional and national unemployment.
B) They make it necessary for the government to resort to expropriation and confiscation.
C) The companies are forced to bring in raw material and workers from their own countries.
D) Companies required to hire local personnel might be forced to take on inadequately trained workers.

Question 32

________ is the chance that political forces may change a country's business environment in ways that lead investors to lose some or all of the value of their investment or be forced to accept a lower-than-projected rate of return.

A) Governmental risk
B) Operating risk
C) Transaction risk
D) Political risk

Question 33

Expropriation is best defined as the ________.

A) transference of ownership of resources from private to public sector with no compensation
B) transference of ownership from private to public sector with compensation to private owners for their losses
C) conversion of state-owned property to privately owned property
D) conversion of state-owned property to privately owned property with no compensation

Question 34

One of the key obstacles faced by countries in economic transition is the lack of managerial expertise.

Question 35

Which of the following is a major obstacle to economic transition?

A) lack of government support
B) environmental degradation
C) privatization
D) black markets

Question 36

CADE International has foreign operations in Taiwan,India,and China.The firm pays an annual insurance premium to the Overseas Private Investment Corporation.The firm is most likely protecting itself from ________.

A) privatization
B) natural disasters
C) nationalization
D) financial instability

Question 37

How are countries classified? Explain with examples.

Question 38

How does economic development in countries affect international business?

Question 39

________ refers to the transfer of ownership of resources from the private to the public sector.

A) Nationalization
B) Expropriation
C) Federalization
D) Conversion

Question 40

What is economic transition? Describe the obstacles that countries face during economic transition.

Question 41

________ is political risk that affects only a specific firm or firms within a specific industry.

A) Inclusive political risk
B) Exclusive political risk
C) Micropolitical risk
D) Macropolitical risk

Question 42

Political risk that affects all firms in a country is referred to as ________.

A) micropolitical risk
B) macropolitical risk
C) inclusive political risk
D) exclusive political risk

Question 43

Which of the following statements about approaches to political risk management is NOT true?

A) Passive political risk management discourages managers from fully or partially hedging their bets against exposure to political hazards.
B) Passive political risk management assumes that it is difficult, if not impossible, to systematically model political risk.
C) Active political risk management assumes that positive and negative political events in any country are neither independent nor random events.
D) Active political risk management assumes that political events unfold in observable patterns that statistical methods can detect.

Question 44

If a foreign company is taken over by the host-country government and some form of compensation is paid,confiscation is said to have occurred.

Question 45

A solid grasp of local values,customs,and traditions can help reduce a company's exposure to political risk.

Question 46

________ has one of the highest levels of macropolitical risk.

A) Saudi Arabia
B) Chile
C) Brazil
D) Afghanistan

Question 47

Expropriation involves the forced transfer of assets from a company to the government with compensation.

Question 48

Expropriation is said to have occurred when a foreign national company dispossesses a home-country company through uncompetitive practices.

Question 49

SJC Enterprises,a global firm,operates a facility in Angola.Managers want to reduce the firm's vulnerability to political risk in Angola.All of the following actions would most likely accomplish this task except ________.

A) reducing net investment in the subsidiary
B) purchasing capital equipment outright
C) buying inputs from local suppliers
D) being a good corporate citizen

Question 50

Nationalization describes government seizure of an entire industry,with or without compensation.

Question 51

A government can limit the economic activities of a foreign firm that resists its effort to introduce home-country nationals into the company.

Question 52

Local content regulations are primarily intended to ________.

A) address cultural differences between local employees and expatriates
B) encourage MNEs to increase production activities in a country
C) address contract negotiation difficulties
D) assess local tax rates on MNEs

Question 53

Among asset seizure approaches,expropriation is more common than confiscation and nationalization.

Question 54

Lobbying is the policy of hiring people to represent a company's views on political matters.

Question 55

Christopher Electronics plans to expand into foreign markets.Top executives want the firm to focus only on locations where the rule of law prevails.Which of the following should most likely be considered by Christopher?

A) wealthier, westernized countries
B) developing, non-Western countries
C) emerging economies experiencing rapid growth
D) countries inclined toward totalitarian-style government

Question 56

CADE Enterprises,a U.S.manufacturer,received assistance from the Overseas Private Investment Corporation when it expanded operations into Saudi Arabia.Which of the following types of support did CADE most likely receive from OPIC?

A) financial capital
B) cultural training
C) legal guidance
D) political risk insurance

Question 57

Foreign properties expropriated by a government cannot be reclaimed.

Question 58

Explain the three types of property seizure.Why might property seizure be a risk for a business operating in a totalitarian nation?

Question 59

The immediate cause of country risk is a legal or political factor.

Question 60

Civil conflict,tax discrimination,weak legal systems,and terrorist actions are political risks faced by MNEs operating in foreign countries.

Question 61

Political risk insurance is more likely to be purchased by MNEs that apply an active approach to political risk management.

Question 62

An individual from a country with a low degree of political risk would most likely be from ________.

A) Venezuela
B) Switzerland
C) Zimbabwe
D) Iraq

Question 63

International companies often must customize products to comply with local standards if they are to do business in a particular country.

Question 64

________ refers to governmental action to dispossess a company or investor.

A) Equity dilution
B) Deracination
C) Expropriation
D) Earnings stripping

Question 65

Briefly explain each of the three main methods companies use to manage political risk.

Question 66

An individual from a country with a high degree of political risk would most likely be from ________.

A) Canada
B) Singapore
C) Syria
D) Japan

Question 67

________ occurs if ownership of a property or assets of a company is transferred to the host government.

A) Internalization
B) Nationalization
C) Deportation
D) Deracination

Question 68

Political risk tends to be higher in developing countries compared to industrialized countries.

Question 69

Expropriation is the term used to describe a host-country government seizing the assets of a foreign corporation and providing no compensation in return.

Question 70

Explain each of the four means of incorporating risk into business strategies when companies employ an adaptation strategy.

Question 71

International companies never have to customize products to comply with local standards if they are to do business in a particular country.

Question 72

Managers who take an active approach to political risk management are likely to rely on statistical modeling to quantify the precise degree of political risk.

Question 73

The Foreign Corrupt Practices Act forbids U.S.companies from bribing government officials or political candidates in other nations.

Question 74

Guanxi,in the Chinese business context,means ________.

A) bribing government officials
B) manufacturing inexpensive products
C) personal relationships
D) preference for communism

Question 75

U.S.individuals are exempt from being prosecuted for bribery under the Foreign Corrupt Practices Act.

Question 76

Country risk is considered similar to ________.

A) political risk
B) commercial risk
C) currency risk
D) cross-cultural risk

Question 77

Political risk occurs when the property of an MNE is threatened through either confiscation or expropriation.

Question 78

Scenario: Cleanshot USA in Russia
When Cleanshot USA, a photography products company, decided to enter the international arena, it chose Russia as its main market. Although Russia has been in transition for years, Cleanshot managers believe their company has tremendous opportunities there.
Russia is in transition from ________.

A) a capitalist economy to a mixed economy
B) a centrally planned economy to a free-market economy
C) a market economy to a centrally planned economy
D) a mixed economy to a centrally planned economy

Question 79

Rockwall Enterprises is planning to expand the firm by establishing operations outside of the U.S.In which of the following countries would Rockwall most likely be able to establish operations most quickly?

A) Bangladesh
B) Zimbabwe
C) Uganda
D) Australia

Question 80

Which of the following statements is true about the political risks in a global marketing environment?

A) The political risk of low-income countries is lesser than high-income countries.
B) The more a country is developed, the greater is the political risk.
C) Political risk is a major deterrent for companies that want to invest abroad.
D) A country with high political risks attracts more investors.