Deck 2: The Global Economic Environment

Question 1

According to the 2013 Index of Economic Freedom compiled by the Heritage Foundation,Hong Kong is ranked as having the highest degree of economic freedom.

Answer 1

True

Question 2

Today,market capitalism is widely practiced around the world,most notably in North America and the European Union.

Answer 2

True

Question 3

According to the Asian Development Bank,only about one-quarter of Myanmar's population has access to reliable electricity,and power shortages and outages are not unusual.

Answer 3

True

Question 4

The death of Venezuelan President Hugo Chavez in March 2013 marked the end of an era,where he toyed with the idea of pursuing a "third way" to economic growth.

Question 5

The World Bank has developed a four-category classification system for stages of marketing development which uses per capita gross national income (GNI)as a base.

Question 6

Grocery distribution companies in Brazil use logistics software to route their trucks;meanwhile,horse-drawn carts are still a common sight on many roads.

Question 7

As per the listings of the 2013 Index of Economic Freedom by the Heritage Foundation,there is a high correlation between the degree of economic freedom and the extent to which a nation's mixed economy is market-oriented.

Question 8

In centrally planned socialism economic systems,the state allocates resources,whereas production resources are privately owned.

Question 9

Myanmar,a low-income country in Southeast Asia with a population of 65 million people,can be considered as one of the emerging markets.

Question 10

President Franklin Roosevelt launched the Works Progress Administration (WPA)which put millions of Americans back to work.

Question 11

In Brazil,Daimler AG works with a cooperative of farmers who transform coconut husks into natural rubber to be used in auto seats,headrests,and sun visors.

Question 12

Although Bangladesh is categorized in the low-income countries,they have genuine market opportunities,particularly in the garment industry.

Question 13

People or organizations with needs and wants and the willingness and ability to buy or sell represent the definition of a market.

Question 14

In Sweden,where the government controls two-thirds of all expenditures,resource allocation is more "market" oriented than "command" oriented.

Question 15

About 25% of the world population is included into the low-income economic countries category as per the World Bank classification system.

Question 16

The lack of employment as seen in the recent times is indicative of the fact that manufacturing is in decline.

Question 17

The Cold War decades that followed World War II saw the East and the West jockeying for geopolitical advantage.

Question 18

With a 2011 GNI per capita of $1,410,India has transitioned out of the low-income category and is now classified as an upper-middle-income country,also known as an industrializing or developing country.

Question 19

The BRICS nations and other emerging markets are also home to companies that are challenging established global giants at home and abroad.

Question 20

Cuba and North Korea are the only two countries where Coca-Cola is not available through authorized channels.

Question 21

For decades,the economies of China,the former Soviet Union,and India functioned according to the tenets of:

A)market capitalism.
B)market socialism.
C)centrally planned socialism.
D)centrally planned capitalism.
E)market capitalism and socialistic capitalism.

Question 22

Market capitalism is an economic system in which:

A)individuals and firms allocate resources and production resources that are privately owned.
B)the state has broad powers to serve the public interest as it sees fit.
C)market resource allocation is commanded by both private and state ownership.
D)there is no correlation between economic freedom and a nation's economy.
E)market-oriented economies function in an identical manner.

Question 23

One of the distinguishing features of a Centrally Planned Capitalism economic system is:

A)all production resources are privately owned.
B)the state has broad powers to serve the public interest as it sees fit.
C)command resource allocation is utilized extensively in a private resource ownership environment.
D)market allocation policies are permitted within an environment of state ownership.
E)none of the above

Question 24

A country with a positive current account balance has a trade deficit;that is,the outflow of money to pay for imports exceeds the inflow of money for sales of exports.

Question 25

The "balance of payments" is a record of all economic transactions between the residents of a country and the developed countries of the world.

Question 26

The foreign exchange market consists literally of a buyer's and a seller's market where currencies are traded for both spot and future delivery on a continuous basis.The forward market is for immediate delivery and the spot market is for future delivery.

Question 27

Product and market opportunities in postindustrial society are heavily dependent upon new products and innovations.

Question 28

Traditionally economists identified main types of economic systems,which include all of the following except:

A)market capitalism.
B)market socialism.
C)centrally planned socialism.
D)centrally planned capitalism.
E)centrally planned nationalism.

Question 29

When a company conducts business across boundaries in countries with different currencies,it is thrust into the turbulent world of exchange risk.

Question 30

The only two countries where Coca-Cola is not available through authorized channels are:

A)India and China.
B)North Korea and South Korea.
C)Cuba and North Korea.
D)Cuba and Venezuela.
E)Singapore and Indonesia.

Question 31

The Washington,D.C.-based Heritage Foundation survey consists of over 175 countries ranked by degree of economic freedom.The key economic variables considered for this ranking includes all of the following except:

A)taxation policy.
B)government consumption of economic output.
C)percent foreign ownership.
D)banking policy.
E)wage and price control.

Question 32

The Swedish government has significant holdings in key business sectors and has a hybrid economic system that incorporates:

A)market capitalism and centrally planned socialism.
B)centrally planned socialism and market socialism.
C)centrally planned socialism and capitalism.
D)market socialism and market capitalism.
E)market capitalism and socialistic capitalism.

Question 33

The Gross Domestic Product (GDP),a measure of a nation's economic activity,is calculated by all of the following factors except:

A)consumer spending.
B)investment spending.
C)government purchases
D)industry purchases.
E)net exports.

Question 34

The CEO of Otis Elevators says they measure elevator populations in countries as units installed per thousand people.According to this,China is about half an elevator per thousand people.

Question 35

The demise of communism as an economic and political system can be explained by all of the following facts except:

A)communism is not an effective economic system.
B)relatively superior performance of the world's market economies.
C)communism works when the currency exchange rate is weak.
D)difficult to manage national economies with a single central plan.
E)increased public participation in matters of state.

Question 36

Hedging exchange rate exposure involves establishing an offsetting currency position such that the loss or gain of one currency position is offset by a corresponding gain or loss in some other currency.

Question 37

The thirty nations that belong to the OECD,who believe in market-allocation economic systems and pluralistic democracy,addressed the vexing problem of bribery by requiring members to cooperate when pursuing bribery allegations.

Question 38

During the past two decades,the world economic environment has become increasingly dynamic.To achieve success,executives and marketers must take into account all of the following realities except:

A)capital movements have replaced trade as the driving force of the world economy.
B)production has become "uncoupled" from employment.
C)the world economy dominates the scene.
D)the struggle between capitalism and socialism continues.
E)the growth of e-commerce diminishes the importance of national barriers.

Question 39

A country's currency would be overvalued if the Big Mac price (converted to dollars)is lower than the U.S.price.

Question 40

The important fact to recognize about the overall balance of payments is that it is always in balance,although imbalances do occur in subsets of the overall balance.

Question 41

All of the following facts pertain to China except:

A)China is in the upper-middle-income category.
B)China is the largest single destination for foreign investment in the developing world.
C)China is a member of the World Trade Organization.
D)China has sprawling bureaucracy.
E)China lacks infrastructure.

Question 42

With a 2011 GNI per capital of $1,410,India has transitioned out from the former category and now is classified as a(n):

A)low-income country.
B)upper-middle-income country.
C)lower-middle-income country.
D)upper-income country.
E)lower-upper-income country.

Question 43

Pursuing alternative sources of energy,such as wind and solar power,is important due to the fact that:

A)people in developing countries are more conscious about the environment.
B)global marketers are more interested in publicizing environmental issues.
C)it is easy to develop solar power in many parts of the world.
D)heavy reliance on fossil fuels contributes to global warming.
E)people worldwide can afford to buy power generated from wind and solar.

Question 44

All of the following facts pertain to Brazil except:

A)Brazil is the largest country in Latin America.
B)Brazil boasts the richest reserves of natural resources in the hemisphere.
C)Brazil's top trading partner is China.
D)Brazil's GNI has grown at an average annual rate of 4 percent over the past 8 years.
E)Brazil lacks logistics software,horse-drawn carts are still a common sight on many roads.

Question 45

Myanmar is considered as one of the emerging markets open for business.All of the following facts pertain to Myanmar except:

A)Myanmar is a low-income country in Southeast Asia.
B)Myanmar has a population of 65 million people.
C)Myanmar is one of the countries considered as "Stans."
D)Myanmar's citizens elected a president.
E)Only one quarter of Myanmar's population has access to electricity.

Question 46

The general characteristics shared by low-income countries do not include:

A)high birth rates.
B)low literacy rates.
C)concentration in Africa south of the Sahara.
D)heavy reliance on foreign aid.
E)lack of genuine market opportunities.

Question 47

The United Nations designates 50 countries in the bottom ranks of the low-income category named as:

A)Low-income countries.
B)Lower-middle-income countries.
C)BRIC countries.
D)Developing countries.
E)LDCs (least-developed countries).

Question 48

Nike produces only a small portion of its output in China,but when the firm refers to China as a "two-billion-foot market," it is referring to the fact that:

A)the Chinese do not wear shoes.
B)the Chinese shoe market is very competitive.
C)China can develop its own shoe market.
D)it will take a long time for China to develop future market.
E)China is a potential future market.

Question 49

Global marketers should take note of the fact that almost half of the world's population is located in:

A)low-income countries.
B)lower-middle-income countries.
C)upper-middle-income countries.
D)high-income countries.
E)higher-middle-income countries.

Question 50

Singapore banned the import,manufacture,and sales of chewing gum in the country since wads of gum were making a mess on sidewalks,buses,and subway trains.Violators are subject to severe penalties,and before buying a pack consumers must register their names and addresses.This,according to author William Greider,demonstrates that Singapore's government:

A)is harshly autocratic.
B)administers a paranoid control over Singaporeans.
C)administers a paranoid control over press and politics.
D)runs an effective welfare state.
E)all of the above

Question 51

The majority of the world's population is included in the following economic category:

A)high-income countries.
B)upper-middle-income countries.
C)lower-middle-income countries.
D)low-income countries.
E)lower-upper-income countries.

Question 52

According to the authors of the Harvard Business Review article,"Serving the World's Poor,Profitably",which of the following is a mistaken assumption that global companies might have about the BOP (bottom of the pyramid)?

A)The poor have no money.
B)The poor are too concerned with fulfilling basic needs to "waste" money on nonessential goods.
C)People in BOP markets will be criticized for exploiting the poor.
D)People in BOP markets cannot use advanced technology.
E)All of the above are mistaken assumptions discussed by the authors.

Question 53

Which of the following nations fall in the lower-middle-income category?

A)Burundi
B)Bangladesh
C)Egypt
D)Venezuela
E)none of the above

Question 54

Among the upper-middle-income countries,also known as industrializing or developing countries,the following aspects are observed except:

A)the CNI per capita ranges from $4,036 to $12,475.
B)the percentage of the population engaged in agriculture drops sharply.
C)people move to the industrial sector.
D)the degree of urbanization increases.
E)None of the above

Question 55

Upper-middle-income countries that achieve the highest rates of economic growth are sometimes referred to collectively as:

A)LDCs.
B)BEMs.
C)BRICs.
D)NIEs.
E)BOPs.

Question 56

Prahalad and Hammond have identified several assumptions and misconceptions about the "bottom of the pyramid" (BOP)that need to be corrected.All of the following mistaken assumptions are correct except:

A)The poor are too concerned with fulfilling basic needs to "waste" money on nonessential goods.
B)The goods sold in developing markets are so expensive that there is no room for a new market entrant to make a profit.
C)The poor have no money.
D)People in BOP markets cannot use advanced technology.
E)Global companies that target BOP markets will be criticized for exploiting the poor.

Question 57

Low-income countries have a GNI per capita of $1,025 or less.The general characteristics shared by countries at this income level include all of the following except:

A)high literacy rates.
B)high birth rates.
C)heavy reliance on foreign aid.
D)political unrest.
E)high agricultural population.

Question 58

Venezuelan President Hugo Chavez believed in all of the following aspects except:

A)nationalization of international companies.
B)imposition of currency controls.
C)free-market economic policies.
D)capitalism is a structural crisis.
E)energy pact known as Petrocribe.

Question 59

Upper-middle-income countries,also known as industrializing or developing countries are those with GNI per capita ranging from:

A)$996 to $3,945.
B)$4,036 to $12,475.
C)$12,475 or higher.
D)less than $995.
E)None of the above

Question 60

Upper-middle-income countries are also known as:

A)Industrializing countries.
B)BRIC countries.
C)Stabilized countries.
D)Manufacturing countries.
E)Agricultural countries.

Question 61

Which country was upgraded from "emerging" to "developed" status by the Financial Times Stock Exchange (FTSE)in 2009?

A)United States
B)South Korea
C)Britain
D)Italy
E)Malaysia

Question 62

To the extent that a country sells more goods and services abroad than it buys,there will be:

A)a greater demand for its currency.
B)a surplus production of goods and services.
C)a scarcity of goods and services within the country.
D)a need for revaluation of its currency.
E)time for fluctuating its currency.

Question 63

The United States' growing trade deficit reflects a number of factors which exclude:

A)increased imports from China.
B)a seemingly insatiable consumer demand for imported goods.
C)the enormous cost of military operations in the Middle East.
D)the services trade surplus.
E)record goods sales to developing countries.

Question 64

The fastest-growing sector of world trade includes:

A)travel and entertainment.
B)accounting and legal services.
C)royalties and license fees.
D)engineering services.
E)all of the above

Question 65

When countries or regions experience currency and / or economic stress,all of the following events can take place except:

A)increased exposure to certain risks.
B)new profit opportunities.
C)lower local currency financing costs.
D)bad debts occur.
E)cancellation of aircraft equipment sales.

Question 66

Which of the following is true about the Triad?

A)Triad countries account for approximately one-third of world income and one- third of world population.
B)Triad countries account for approximately 75% of world income as measured by GNP.
C)Triad countries are those in which consumer products,industrial products,and the services sector each contribute one-third to GDP.
D)Triad countries account for approximately 25% of world income as measured by GNP.
E)Triad countries account for approximately 50% of world income as measured by the World Bank.

Question 67

The Big Mac Index shows that the price of the Big Mac in China converted from the local currency,yuan,to be $2.18,whereas its price in the United States is $3.73.This shows that:

A)the Big Mac is more popular in China than in the United States.
B)the Big Mac is less expensive in the United States than in China.
C)the Chinese yuan is overvalued when compared to US $.
D)the Chinese yuan is undervalued against the US $.
E)beef is less expensive in China than in the United States.

Question 68

The Organization for Economic Cooperation and Development (OECD)is comprised of:

A)the 34 high-income countries.
B)countries that believe in market-allocation economic systems.
C)pluralistic democracies.
D)countries that demonstrate progress toward economic reform.
E)All of the above statements are applicable.

Question 69

One Friday a few years ago,the Big Mac Index suggested that the yen was overvalued relative to the dollar by 70%.When currency markets opened on the following Monday,anyone using the Big Mac Index would conclude that the yen was only 20% overvalued relative to the dollar.What is the most likely explanation for this?

A)Japan's Central Bank acted to prop up the yen.
B)Inflation in Japan suddenly spiked upward.
C)McDonald's headquarters stopped hedging.
D)McDonald's Japan reduced the yen price of a Big Mac.
E)McDonald's Japan increased the yen price of a Big Mac.

Question 70

The term "Expanded Triad" includes all of the following countries or regions except:

A)Japan.
B)United States.
C)Canada.
D)Mexico.
E)Russia.

Question 71

Which of the following statements is not accurate?

A)India's teledensity-a measure of ownership of private telephones-is only 20% of population.
B)In China,saturation levels of private motor vehicles and personal computers (PCs)are quite low.
C)In 2001,EU had 49 cars per 100 people.
D)In Russia,200 people out of 1,000 own cars.
E)In India,150 people out of 1,000 own cars.

Question 72

Recently,the Organization for Economic Cooperation and Development (OECD)has become more focused on global issues,social policy,and labor market regulations as seen by:

A)addressing the vexing problem of bribery.
B)requiring members to cooperate when pursuing bribery allegations.
C)helping members candidly assess their own economic policies.
D)member nations working together in committees to review social policies.
E)all of the above

Question 73

Product and market opportunities in a postindustrial society are more heavily dependent upon new products and innovations than in industrial societies.An example of this would be:

A)Nestlé marketing Bono brand cookies in Brazil.
B)Coca-Cola Company developing a beverage Vintago in low-income countries.
C)New e-commerce markets for interactive forms of electronic communication.
D)Hermes creating handbags called Amazonia.
E)India's Suzlon Energy using wind-driven turbines.

Question 74

The "balance of payments" is a record of all economic transactions between the residents of a country and the rest of the world.It is divided into the current and capital accounts.Current accounts include all of the following except:

A)balance on goods.
B)portfolio investments.
C)balance on services.
D)goods imports.
E)goods exports.

Question 75

Which two companies are sourcing product components from small-scale enterprises,which in turn are helping preserve old-growth forests as well as economic opportunities in Brazil?

A)Ford Motor Company and Armani
B)Daimler AG and Hermes
C)General Motors and Hugo Boss
D)Volkswagen and Coach
E)Coca-Cola and Nestlé

Question 76

If an American tourist in Tokyo pays more in dollars for the same amount of yen that she bought last week,then:

A)a Japanese tourist in San Francisco pays more in yen for the same amount of dollars that she bought the week before.
B)the dollar has depreciated relative to the yen.
C)the yen has depreciated relative to the dollar.
D)the dollar has appreciated relative to the yen.
E)the dollar and yen both remained same in value.

Question 77

Porsche relies on currency hedging rather than price increases in order to:

A)boost pretax profits on sales of its automobiles.
B)balance the relative value of the dollar compared to the euro.
C)protect all earnings from foreign-exchange movements.
D)generate about 45% of its sales in the United States.
E)A,B,and C

Question 78

Measuring elevator populations in countries measured as units installed per thousand people gives an estimate of the market for elevators.That China has about one half an elevator per thousand people is indicative of:

A)low product saturation level.
B)high product saturation level.
C)high population level.
D)high technological level.
E)low technological level.

Question 79

The top global merchandise exporter is:

A)China.
B)Germany.
C)the United States.
D)Japan.
E)Korea.

Question 80

Devaluation can result from government action or an economic crisis.In August 1998,the Russian economy imploded.As a result,all of the following listed events happened except:

A)the ruble plunged in value.
B)the government defaulted on its foreign debt obligation.
C)many Russians faced wage cuts and layoffs.
D)Russia's economy did not recover from the impact.
E)savings were wiped out as banks collapsed.