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International Business 2nd Edition Peng Test Bank
International Business 2nd Edition Peng Test Bank
4. The World Trade Organization was created after World War II as a multilateral trading system.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Difficult
5. General Agreement on Tariffs and Trade (GATT) expanded considerably into WTO.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
7. The multilateral trading system resolves disputes between two countries involved in global trade.
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8. The crucial principle of GATT/WTO is nondiscrimination, ensuring that countries do not discriminate among its
trading partners.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
9. Upon establishment of GATT, there were many loopholes in the Multifibre Arrangement (MFA), designed to limit free
trade in textiles.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
10. With tariffs being restricted by international agreements, many governments use NTFs (nontariff barriers) to protect
their domestic market.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
11. WTO has six main areas including trade of goods, services, intellectual property and banning governments from
protecting their agricultural industry.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
12. The negotiations sponsored by WTO in Doha, Qatar, were aimed directly at the economic development of developing
countries.
a. True
b. False
ANSWER: True
POINTS: 1
13. The 'stumbling block' of the Doha round turned out to be intellectual property.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
14. The original objective of the IMF was to help countries maintain fixed exchange rates.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
15. The objective of the IMF is to help countries experiencing severe balance of payments problems.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
16. The IMF is helping developing countries, but is not involved with Western European countries.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Moderate
17. IMF conditionality often involves severe cuts in government budgets with the aim to enable countries to service their
external debt.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
18. The IMF is often unpopular in the countries that it tries to help.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
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19. The IMF is responsible for the stability of the global banking system.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Moderate
21. The IMF provided loans and loan guarantees for more than 10% of Hungarian GDP to Hungary during the financial of
2008/09.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
22. In the financial crisis, the IMF and the EU jointly designed a rescue packages in 2010 and 2012.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Difficult
23. After Russia joined the EU, the WTO has been able to prevent a trade war between the EU and Russia.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Difficult
24. In ASEAN, the richest country has a per capita GDP that is more than 50 times as high as the poorest country.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
26. ASEAN is an important trading partner of the EU: more than 10 per cent of EU exports go to ASEAN countries.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Moderate
27. Russia accounts for more than 10 per cent of exports in the case of several EU member countries.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Moderate
28. The WTO ruling in the controversy over hormone treated beef provided great support to consumer health advocates in
Europe.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Moderate
29. The WTO allows developing countries to subsidize their agriculture sectors, but sets a cap for the amount of such
subsidies.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
30. Countries have committed to using investor-state dispute settlement tribunals in the WTO treaties.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Moderate
32. Latin American countries launched negotiations with Canada and the US for a possible Free Trade Area of the
Americas.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
33. The ANZCERTA or CER, launched in 1983, turned historical rivalry between Australia and New Zealand into a
partnership.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
35. Due to trade diversion effects, countries like Mexico and Australia may lose trade out if the EU and the USA sign
TTIP.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
36. Which of the following statements regarding the Airbus-Boing subsidy conflict is correct?
a. Airbus made a formal complaint about Boeing in the WTO.
b. Boeing made a formal complaint about Airbus in the WTO.
c. The USA made a formal complaint about the EU in the WTO.
d. All of the above statements are correct.
37. In response to the EU’s complaint that preferential military R&D contracts unduly benefit Boeing, the USA argued
that
a. R&D contracts are not an issue of concern to the WTO.
b. R&D contracts to the military arm do create not benefits for Boeings civil aircraft manufacturing.
c. full transparency in military R&D contracts, as requested by the EU, would endanger US national security.
d. R&D contracts are regulated by a separate agreement under the WTO.
ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
38. Which of the following institutions was established following World War II to regulate global trade between
countries?
a. WTO, World Trade Organization
b. GATT, General Agreement on Tariffs and Trade
c. UN, United Nations
d. EU, European Union
ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
42. The most (in)famous loophole in merchandise trade created through GATT was
a. TRIPS. b. NTB.
c. MFA. d. technical approval procedures.
ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
46. Which one of the following was NOT part of the agenda of the Doha round?
a. Reducing agricultural subsidies in developing countries
b. Slashing tariffs in the industries that developing countries might benefit from
c. Freeing up trade in services
d. Strengthening intellectual property protection
ANSWER: a
POINTS: 1
50. Which statement about the WTO dispute settlement mechanism is correct?
a. The WTO can impose financial penalties on countries found guilty.
b. The WTO can impose financial penalties on companies found guilty.
c. Losing a case in the WTO automatically triggers punitive tariffs for the offending country.
d. The WTO ruling may include permission for countries to impose punitive tariffs on the offending country.
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
53. Which countries received the largest IMF bailout loans since the year 2000?
a. Argentina and Brazil b. Turkey and Ukraine
c. Greece and Portugal d. Hungary and Romania
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
55. Simon Johnson argued that the 'IMF specializes in telling its clients what they don’t want to hear'. What was he
referring to?
a. Business leaders don’t like to hear that their business practices are not socially responsible.
b. Political leaders of countries don’t like to hear that their economic policies are not economically sustainable.
c. Bankers don’t like to hear that they ought to give more loans to developing countries.
d. Academic economists don’t like to hear that the real world is more complex than their formal economic
models.
ANSWER: b
POINTS: 1
DIFFICULTY: Difficult
57. Which regional integration agreement includes Singapore, Malaysia and Indonesia, among other members?
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58. The conflict over hormone treated beef is lingering as an international trade dispute because
a. the WTO is not relevant for these sorts of conflicts.
b. the WTO ruling was invalid because of a bribery case.
c. the US withdrew from the process.
d. the scientific evidence is inconclusive.
ANSWER: d
POINTS: 1
DIFFICULTY: Difficult
59. The economic benefits of regional integration in Africa are limited because
a. the comparative advantages of African countries in the world economy are fairly similar.
b. many African countries have comparative advantages in extractive industries such as mining.
c. a large share of exports of African countries goes to countries outside Africa.
d. all of the above statements are correct.
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
61. The negative effect for countries left out of a system free trade agreements is called
a. trade diversion. b. trade creation.
c. trade liberalization . d. trade enhancement.
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
62. Which of the following makes regional trade agreement difficult to negotiate?
a. Interest groups are concerned about the loss of jobs.
b. Neighbouring countries may have historical tensions, or even wars.
c. Neighbouring countries often have similar industry structures.
d. All of the above.
65. Rating agencies such as Moody’s and S&P are powerful because
a. they assess the environmental impact of World Bank-sponsored projects.
b. they assess the quality of national banking regulation.
c. they assess the riskiness of financial instruments held by banks.
d. they assess the triple bottom line commitments of MNEs.
ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
66. Which of the following is the economic trade agreement between Australia and New Zealand?
a. ANZCERTA b. ASEAN
c. APEC d. ANZU
ANSWER: a
POINTS: 1
DIFFICULTY: Moderate
67. Which of the following institutions has a similar role as the World Bank, but limited to a particular part of the world?
a. European Central Bank, Frankfurt b. Bank of International Settlements, Basle
c. Copenhagen Institute d. EBRD, London
ANSWER: d
POINTS: 1
DIFFICULTY: Difficult
68. The primary purpose of the World Bank is to finance which sort of projects?
a. Privatization projects in transition economies
b. Economic development projects in less developed countries
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72. Discuss the formation of GATT and the issues that precipitated the formation of the WTO (Post GATT).
ANSWER: GATT was established in 1949. Unlike the WTO, GATT was technically an agreement but not an
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73. Identify how the WTO addressed the former problems of the old GATT and how WTO executes their decisions.
ANSWER: The WTO addresses problems as follows:
Time limitations for panel discussion and decisions. The panel is three neutral countries whose
1.
role is reaching a judgment. This judgment is titled the panel recommendation.
Power is removed from the accusing country to block any unfavourable decision. The WTO
2.
decision is final.
The WTO is nicknamed the 'supreme court in trade'. However, the WTO does not have real
enforcement capabilities. The WTO executes the final decision by recommending that losing
countries change their laws or practices. They authorize the winning country to use tariff
3.
retaliation to compel the offending countries' compliance with the rulings. Fundamentally, the
WTO ruling is a recommendation and the country receiving the recommendation retains full
sovereignty on whether or not to implement the panel recommendation.
POINTS: 1
DIFFICULTY: Moderate
74. Why is the help provided by the IMF to countries facing a budget crisis often controversial in the country being
helped?
ANSWER: Key to the answer is conflict between the (short-term) objectives and interests of the citizens of the
country and the economic sustainability of the country, especially its ability to finance its deficits. [See
pages 275-277 plus In Focus 9.3]
POINTS: 1
DIFFICULTY: Easy
75. Why is a system of bilateral free trade arrangements creating fewer economic benefits than global trade liberalization?
ANSWER: The key to the answer is the concept of ‘trade diversion’ as trade is created within the FTA following
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76. What challenges does regional integration among emerging economics face?
ANSWER:
Regional integration among emerging economics faces at least four major challenges. Firstly, neighbouring
countries often face historical conflicts; this inhibits commitments to opening borders and aligning regulatory
regimes. Secondly, the benefits of integration may be unequally distributed. For example, some local
production may be replaced by imports while other sectors may be expanded by the rising of exports.
However, it is not easy for workers moving from one sector to another. Thirdly, the economy structures of
countries are different. Therefore deeper integration may enable countries to lose their ability to resist external
shocks through economic policy. Lastly, many emerging economies share similar competitive advantages.
They would benefit most from access to developed markets rather than regional trade.
POINTS: 1
77. Discuss how the institution-based perspective accounts for the success of MNEs by focusing on regional
opportunities.
ANSWER: The slowdown of multilateralism and the acceleration of regionalism propelled managers to focus greater
attention on regional levels in comparison to a wider global focus. The majority of MNEs that continued
to grow their home regions through expansion recorded a greater amount of revenues from their regional
locations. Examples are firms that chose to focus on the EU or NAFTA. The larger MNEs continued to
have global presence. However, in analyzing their center of gravity (which is measured by revenues), the
home regions are responsible for this income generation.
Global strategies make good business sense. There are cultural, economic and geographic
similarities within a region. Understanding these dimensions may lower a firm's foreign expansion
liabilities.
Managers need to understand the rules of the game, who the players are and what the rules
represent at both global and regional expansion levels. Trade negotiations involve politics and
negotiations. Executives cannot ignore the institutions that govern the trade policies.
Successful international managers become skilled in developing corporate strategies, which shift
over time to meet changes in locations, consumer preferences and laws. By not assuming a 'we don't care
about global trade agreements' attitude, managers are strategically positioned to be in control and conduct
due diligence, allowing managers to better prepare for shifts in international business and to recognize
opportunities regionally and globally.
POINTS: 1
DIFFICULTY: Difficult
This question really tests students’ ability of developing coherent yet balanced arguments that identify
conflicts of interests without blaming unduly one party for the failure of the negotiations in Copenhagen.
See pages 287-289 for some of the key arguments, but given the broad nature of the issue students may
come up with additional arguments.
POINTS: 1
DIFFICULTY: Difficult
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