INT BUSS Practice Questions Exam 1
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Questions and Answers

Some companies cannot avail the benefits of outsourcing because of the nature of their work.

True (A)

The World Bank's primary role is to regulate global trade and ensure nations follow trade agreements.

False (B)

The World Bank is known for providing financial support to countries facing economic crises.

True (A)

One of the UN's key goals is to improve living standards, employment, and economic progress.

<p>True (A)</p> Signup and view all the answers

The GATT played a central role in coordinating global efforts to address the financial crisis of 2008-2009.

<p>False (B)</p> Signup and view all the answers

The Uruguay Round, concluded in 1993, decreased protections for intellectual property like patents and trademarks.

<p>False (B)</p> Signup and view all the answers

The "beggar-thy-neighbor" trade policies involved countries gradually reducing trade barriers, which helped to worsen the Great Depression.

<p>False (B)</p> Signup and view all the answers

Rivers Inc., a U.S. company, aims to make its products cheaper by subcontracting some tasks to manufacturers in countries with lower labor costs.

<p>True (A)</p> Signup and view all the answers

The World Bank is primarily focused on lending to high-income nations.

<p>False (B)</p> Signup and view all the answers

The UN has a strong role in policing countries that fail to comply with international trade agreements.

<p>False (B)</p> Signup and view all the answers

A sports apparel manufacturer setting up a production unit in China to take advantage of lower labor costs is an example of foreign direct investment.

<p>True (A)</p> Signup and view all the answers

The World Bank providing $100 million to Kenya for rural healthcare facility development is an example of foreign direct investment.

<p>False (B)</p> Signup and view all the answers

Lowering barriers to international trade allows firms to see the world, rather than just one country, as their market.

<p>True (A)</p> Signup and view all the answers

According to the WTO, the volume of world merchandise trade has grown faster than the world economy since 1950.

<p>True (A)</p> Signup and view all the answers

The expansion of world trade results in nations becoming less dependent on one another for essential goods and services.

<p>False (B)</p> Signup and view all the answers

FDI flows have increased faster than global trade and output over the past 30 years.

<p>True (A)</p> Signup and view all the answers

Globalized markets and production, along with the growth of world trade, FDI, and imports, protect home markets from foreign competitors.

<p>False (B)</p> Signup and view all the answers

The increasing power of microprocessors, while their cost decreases, is a factor that contributes to globalization by making it easier and cheaper to communicate and conduct business across borders.

<p>True (A)</p> Signup and view all the answers

The lowering of barriers to international trade has had no impact on the growth of multinational corporations.

<p>False (B)</p> Signup and view all the answers

Foreign direct investment is only beneficial to the investing company, and it has little to no positive impact on the host country.

<p>False (B)</p> Signup and view all the answers

Russia's shift toward greater state involvement in its economy has minimized the risks of doing business there.

<p>False (B)</p> Signup and view all the answers

The prevailing global economic trends suggest that a more welcoming environment for international business is emerging.

<p>True (A)</p> Signup and view all the answers

Globalization has effectively eliminated the risks of global financial contagion.

<p>False (B)</p> Signup and view all the answers

Globalization critics argue that low-wage manufacturing jobs have migrated offshore, reducing demand for unskilled labor and causing their wages to rise.

<p>False (B)</p> Signup and view all the answers

Technological change has had a more significant impact than globalization on the decline of labor's share of national income.

<p>True (A)</p> Signup and view all the answers

Increasing government regulation of markets is generally considered the most effective solution to the problem of stagnant wages for unskilled workers.

<p>False (B)</p> Signup and view all the answers

Proponents of free trade argue that wealthier nations tend to demonstrate a greater commitment to environmental and labor standards.

<p>False (B)</p> Signup and view all the answers

Global interconnectedness, according to globalization critics, reduces a nation's ability to act independently.

<p>True (A)</p> Signup and view all the answers

Globalization critics contend that the gap between rich and poor nations has narrowed over the past century.

<p>False (B)</p> Signup and view all the answers

Debt relief advocates argue that democratically elected governments in poor nations should be held responsible for the debts incurred by previous corrupt regimes.

<p>False (B)</p> Signup and view all the answers

A firm must become a multinational enterprise in order to engage in international business.

<p>False (B)</p> Signup and view all the answers

International businesses can maintain consistent practices across all countries due to the uniformity of global business environments.

<p>False (B)</p> Signup and view all the answers

The adoption of a common currency has simplified cross-border transactions for international businesses.

<p>False (B)</p> Signup and view all the answers

Domestic companies are immune from the regulations imposed by governmental intervention in international trade and investment.

<p>False (B)</p> Signup and view all the answers

Managing an international business is inherently easier than managing a domestic business.

<p>False (B)</p> Signup and view all the answers

A multinational enterprise (MNE) primarily focuses on conducting business over the internet.

<p>False (B)</p> Signup and view all the answers

An MNE must have production units in more than two countries to qualify as such.

<p>True (A)</p> Signup and view all the answers

A company that exports its products to multiple countries is automatically classified as a multinational enterprise.

<p>False (B)</p> Signup and view all the answers

A company that lists its securities on a public exchange automatically qualifies as a multinational enterprise.

<p>False (B)</p> Signup and view all the answers

A multinational enterprise is a company that has a significant presence, including production units and operations, in multiple countries.

<p>True (A)</p> Signup and view all the answers

The term "multinational enterprise" simply refers to a company that sells its products in multiple countries.

<p>False (B)</p> Signup and view all the answers

An MNE always has a global headquarters in a major city like New York or London, ensuring oversight of all its operations.

<p>False (B)</p> Signup and view all the answers

A company that outsources some of its production to manufacturers in lower-cost countries can be considered a multinational enterprise.

<p>True (A)</p> Signup and view all the answers

Fin-Smart's decision to set up a customer service call center in India is an example of outsourcing.

<p>True (A)</p> Signup and view all the answers

The term homogenizing markets refers to the process of standardizing products and services to cater to a global audience.

<p>True (A)</p> Signup and view all the answers

Vertical integration is a business strategy where a company expands its operations into different but related industries, such as a car manufacturer also producing car parts.

<p>False (B)</p> Signup and view all the answers

Early outsourcing efforts were primarily focused on manufacturing activities.

<p>True (A)</p> Signup and view all the answers

Reduced tariffs on imports of manufactured goods act as a barrier to firms achieving the optimal dispersion of their productive activities.

<p>False (B)</p> Signup and view all the answers

Government regulations generally help firms in achieving optimal dispersion of their productive activities across the globe.

<p>False (B)</p> Signup and view all the answers

The General Agreement on Tariffs and Trade (GATT)'s primary responsibility was to protect government-owned enterprises.

<p>False (B)</p> Signup and view all the answers

The World Trade Organization is the primary organization responsible for policing the global trading system.

<p>True (A)</p> Signup and view all the answers

The International Court of Justice is responsible for establishing multinational treaties governing the global business system.

<p>False (B)</p> Signup and view all the answers

The World Trade Organization is a strong advocate for lowering barriers to cross-border trade and investment.

<p>True (A)</p> Signup and view all the answers

The main function of the International Monetary Fund is to provide low-interest loans to developing countries for infrastructure development.

<p>False (B)</p> Signup and view all the answers

The International Monetary Fund is considered the lender of last resort for nations facing economic turmoil.

<p>True (A)</p> Signup and view all the answers

The International Development Association plays a major role in policing the global trading system and ensuring adherence to trade rules.

<p>False (B)</p> Signup and view all the answers

Horizontal integration involves a company expanding its operations into different but related industries.

<p>False (B)</p> Signup and view all the answers

The World Bank primarily promotes the regulation of national economies.

<p>False (B)</p> Signup and view all the answers

The Sullivan Principles focused on improving conditions for workers in the U.S. auto industry.

<p>False (B)</p> Signup and view all the answers

Moore's Law states that processing power in computer chips doubles every 18 months.

<p>True (A)</p> Signup and view all the answers

Containerization has made it easier for businesses to manage globally dispersed production systems.

<p>True (A)</p> Signup and view all the answers

The decline in the U.S. share of world output and exports is linked to an increase in trade barriers.

<p>False (B)</p> Signup and view all the answers

Japanese companies invested in North America and Europe in the 1970s to exploit high tariffs in those markets.

<p>False (B)</p> Signup and view all the answers

The total cumulative value of foreign investments is referred to as 'portfolio investments'.

<p>False (B)</p> Signup and view all the answers

During the 1990s, foreign direct investment decreased in both developed and developing nations.

<p>False (B)</p> Signup and view all the answers

Keynes's Law predicts an inverse relationship between the cost of production and the power of microprocessor technology.

<p>False (B)</p> Signup and view all the answers

Say's Law explains the exponential growth of computing power.

<p>False (B)</p> Signup and view all the answers

The artificial fixing of the currency rate by China is a factor that has contributed to the problems in the U.S. subprime mortgage lending market.

<p>True (A)</p> Signup and view all the answers

Containerization allows for a significant reduction in the time it takes to transfer goods from one location to another.

<p>True (A)</p> Signup and view all the answers

The decline in the U.S. share of world output is directly linked to a reduced level of industrialization in developing nations.

<p>False (B)</p> Signup and view all the answers

The decline in the U.S. share of world output is primarily related to the deepening of the global financial crisis.

<p>False (B)</p> Signup and view all the answers

Japanese companies sought to invest in North America and Europe in the 1970s as a way to take advantage of lower labor costs.

<p>False (B)</p> Signup and view all the answers

The total cumulative value of foreign investments is best referred to as 'stock market investments'.

<p>False (B)</p> Signup and view all the answers

Flashcards

Outsourcing Benefits

Outsourcing may not be applicable for specific types of work.

World Bank Role

The World Bank oversees adherence to international trade treaties.

Lender of Last Resort

The World Bank is identified as the lender of last resort to countries in financial need.

UN Mandates

The UN promotes higher living standards and conditions for economic progress.

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GATT and Financial Crisis

In response to the 2008 financial crisis, GATT served as the forum for cooperation.

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Uruguay Round

The Uruguay Round reduced global protections for intellectual property.

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Beggar Thy Neighbor Policies

These policies encouraged countries to lower trade barriers, worsening the Great Depression.

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True or False Statements

Statements like these are used to evaluate understanding of economic principles.

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Trade Barriers

Restrictions that countries impose on imports or exports to control the amount of trade.

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Global Cooperation

International entities like the UN and World Bank work towards collaborative economic strategies.

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Foreign Direct Investment (FDI)

FDI occurs when a company invests directly in production or business operations in another country, like setting up production units.

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World Trade Organization (WTO)

WTO is an international body that sets rules for global trade and promotes trade liberalization among nations.

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Merchandise Trade Growth

The volume of world merchandise trade has increased faster than the world economy since 1950, indicating a more interconnected market.

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Globalization of Trade

Globalization has led firms to see the world as their market rather than just their own country, easing trade barriers.

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Flow of FDI

Over the past 30 years, foreign direct investment flows have grown quicker than world trade and output, highlighting globalization's impact.

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Barriers to International Trade

Lowering barriers to trade allows companies to engage in global markets, promoting competition and efficiency.

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Nations' Interdependence

Expansion of trade implies increased interdependence among nations for essential goods and services, contrary to isolation.

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Impacts of Globalization

The globalization of markets and production leads firms to face more foreign competition, not less.

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Microprocessor Cost and Power

The cost of microprocessors continues to decline while their performance capabilities increase, affecting tech industries.

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World Merchandise Trade

World merchandise trade encompasses all goods exchanged over international borders, reflecting economic health and cooperation.

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Multinational Enterprise (MNE)

A firm that has production units in more than two countries.

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Characteristics of MNE

An MNE exports and produces goods in multiple countries.

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Exports

Products sold from one country to another.

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Production Units

Facilities where goods are manufactured or assembled.

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International Business

Business activities that involve cross-border transactions.

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Global Markets

Marketplace that transcends national borders.

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Internet Business

Commercial activities conducted online.

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Public Exchange Listing

Company shares sold on a public stock market.

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Moore's Law

Predicts that microprocessor power doubles, costs halve every 18 months.

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Containerization

A system that simplifies transshipment across different transport modes.

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Decline of US Output

Relative decline in US world output and exports signifies economic shifts.

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Japanese Investment in 1970s

Japanese firms invested abroad to escape competitive domestic markets.

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Economic Development Growth

Growth in economic development reflects increased global economic activities.

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Subprime Mortgage Problems

Issues arising in the U.S. mortgage market related to risky loans.

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Currency Rate Fixing by China

Artificially manipulating currency values to benefit exports.

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Accumulation of Foreign Shares

The total value of all overseas investments held by entities.

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Industrialization in Developing Nations

Reducing industrialization indicates economic shifts in those nations.

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Portfolio Investments

Assets held in a diversified manner, usually not controlling companies.

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Global Financial Crisis Impact

The crises leading to increased amounts of FDI in both developed and developing nations.

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Buyer-Seller Connection

Containerization aids buyers and sellers in easily finding each other.

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Simplification of Transport

It makes transportation from one mode to another more efficient.

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Economic Development of World Economy

The evolution of economic advancements across different nations.

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Outsourcing

Delegating certain tasks or services to external providers, often overseas, to reduce costs.

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Service activities

Tasks provided by firms to assist customers, typically related to non-manufacturing sectors.

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Impediments to optimal dispersion

Factors that hinder firms from distributing their operations globally for efficiency.

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General Agreement on Tariffs and Trade (GATT)

An international treaty aimed at reducing tariffs and promoting trade.

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International Monetary Fund (IMF)

An international organization that provides financial assistance and advice to member countries in economic distress.

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World Bank

An international financial institution that provides loans for development projects to reduce poverty.

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G20

An international forum for governments and central bank governors from 19 countries and the EU to discuss and promote global economic stability.

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International Trade

The exchange of goods and services between countries.

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Barriers to foreign direct investment

Obstacles that prevent or hinder foreign investments in a country.

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Policing the global marketplace

Ensuring compliance with international trade laws and agreements by member states.

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Collective security

A system by which states act together to respond to threats against peace and security.

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Regulation of national economies

Government interventions to control the economy within a nation.

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Economic and political risk

The likelihood that a country's economic policies could adversely affect investment returns or the stability of investments.

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Risks in Russian business

Doing business in Russia involves risks due to state control and authoritarianism.

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Global economic trends

Current trends show a shift towards a favorable economic system for international business.

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Globalization and financial contagion

Globalization does not reduce the risks of global financial contagion.

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Wage decline causes

Critics say wage decline is due to moving jobs offshore and lower demand for unskilled labor.

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Impact of technology vs globalization

Technological change impacts labor's share of income more than globalization.

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Government regulation for stagnant incomes

Some suggest regulation is key to resolving stagnant incomes for the unskilled.

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Free trade and environmental violations

Supporters claim richer countries often violate environmental regulations.

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National sovereignty and globalization

Critics argue that globalization limits national sovereignty.

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Rich-poor gap

Critics argue the gap between rich and poor nations has not shrunk.

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Debt relief arguments

Supporters argue new governments should not pay debts from corrupt predecessors.

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International business engagement

A firm can engage in international business without becoming a multinational enterprise.

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Country-specific practices

International businesses must adapt practices to different countries.

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Easier cross-border transactions

Cross-border transactions have become easier due to common currencies.

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Government intervention limits

Domestic businesses must navigate governmental limits in international markets.

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Managing international businesses

Managing an international business is often more complex than a domestic one.

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Study Notes

True/False Questions - Globalization

  • The shift towards a more integrated and interdependent world economy is referred to as globalization.
  • A company does not need a large size to benefit from globalization of markets.
  • Companies hope to lower costs and improve product quality through globalization of production.
  • Consumer products are the most global markets currently.
  • Outsourcing is not limited to manufacturing enterprises.
  • The U.S. healthcare sector can benefit from outsourcing to lower-cost producers in other nations.
  • The World Bank is focused on policing the world trading system and ensuring nations follow trade rules.
  • The World Bank is not the lender of last resort.
  • Higher standards of living, full employment, and social progress are UN mandates.
  • The GATT, in 2008 and 2009, was the forum to coordinate global financial crisis responses.
  • Patents, trademarks, and copyrights were reduced in protection during the Uruguay Round in 1993.
  • Retaliatory trade policies contributed to the 1930s Great Depression.
  • Rivers Inc., a U.S. sportswear company, setting up production in China, is an example of foreign direct investment.
  • When providing aid for healthcare facilities, a $100-million donation to Kenya is an example of foreign direct investment.
  • Lowering trade barriers globally gives businesses greater market access.
  • World merchandise trade has grown faster than the world economy since 1950.
  • Globalization does not mean nations are becoming less dependent.
  • Foreign direct investment (FDI) growth has outpaced world trade and output recently.
  • The fall in microprocessor cost, despite the increasing power, aligns with Moore's Law.
  • Transportation costs have fallen dramatically due to containerization.
  • The Internet is the information backbone of the global economy.
  • Consumer tastes and preferences have become more varied due to globalization.
  • The U.S. was the dominant power in the early 1960s but lost that position by 2009.
  • Non-U.S. firms invested internationally to spread production and gain market share.
  • A multinational enterprise (MNE) is any company that exports or imports products.
  • Medium and small-sized multinational firms (mini-multinationals) are declining.
  • Globalization hasn't significantly increased U.S. firm dominance in the international marketplace.
  • The world economy is trending toward a system that benefits international businesses more.
  • Global financial contagion risks are lower due to globalization.
  • Critics suggest that globalization reduced unskilled labor demand.
  • Technological change has affected labor income more than globalization.
  • Increased government regulation is not the solution for stagnant labor income.
  • Rich nations violate environmental and labor regulations more as they become richer.
  • Globalization hasn't reduced the gap between rich and poor nations.
  • Debts incurred by corrupt leaders do not need to be honored by subsequent democratic governments.
  • Firms can engage in international business without becoming multinationals.
  • International business practices need to vary by country.
  • Cross-border transactions are easier with a shared currency in international business.
  • Domestic businesses need to work within government-imposed trade limits.
  • International business management is more complex than domestic business management, due to the global nature, and variation in business practices
  • Communist nations globalized markets after the 1980s collapse.
  • Globalization involves strategies like regulating/privatizing state-owned firms/decreasing competition/reducing foreign investment.
  • Consequence of globalization includes increasing national economies interdependence, increasing outsourcing/services, differentiation across cultures, and in increase in trade barriers.
  • Globalization of markets benefits from the reduced barriers across trade lines.
  • Globalization of markets is hindered by differences in taste and preferences, higher costs in developed countries/ homogenization of material culture, and increase in outsourcing for services.
  • Globalization leads to increased interdependence among markets, not less.
  • Outsourcing occurs, where a firm moves parts of production to a more cost-effective location, an example of outsourcing is Fin-Smart.
  • The GATT has been responsible for promoting environment friendly technology and policies.
  • The WTO is primarily responsible for policing world trading systems and ensures trade treaty adherence.
  • The WTO promotes trade barriers reduction and investment.
  • The World Bank isn't responsible for enforcing global commodity/global trade rules.
  • The International Monetary Fund is seen as lender of last resort for nations in economic turmoil.
  • The World Trade Organization (WTO) was established in 1945.
  • The G20 was initially established to maintain international cooperation and security.
  • The G20 aims to create coordinated responses to financial crises in developing countries.
  • Exporting or providing services to another country is considered international trade.
  • The WTO aims to provide a mechanism for financial aid/investment/trade cooperation/monetary coordination.
  • The WTO addresses challenges in international trade and investment.
  • The WTO aims for greater world living standards across global nations.
  • Manufactured, agricultural, and mining goods/products, are part of merchandise trade.
  • Developing nations in agriculture will benefit the most from reduced agricultural tariffs and subsidies.
  • The reduction of trade barriers leads to increased global connections/intertwined economies, not decreased independence.
  • A 2009 U.S. financial crisis was due to problems in the mortgage lending market.
  • Moore's Law describes how microprocessor technology evolves (doubling in power/reducing cost every 18 months).
  • Containerization reduced the time/simplified shipment across transport modes enabling ease of global trade.
  • The world experiences a decline in the output market share of the United States, impacting world trade.
  • The rise of countries in economic development has impacted global market share distributions.
  • Multinational firms have moved manufacturing to other global locations due to lower labor costs, a significant aspect of global trade.
  • Foreign direct investment (FDI) amounts increased dramatically throughout the 1990-'s.
  • FDI increase reflects growing globalization of international business.
  • Brazil was the highest recipient of foreign direct investment.
  • A multinational enterprise (MNE) is a company with operations in multiple countries.
  • Mini-multinationals are smaller multinational enterprises, differing in size, not type or ownership structure from MNE's
  • China presents threats/opportunities for multinational businesses due to competition and potential trade conflicts.
  • The global economy faced important changes in the 21st century.
  • A shift toward a global economy is positive/negative in various ways across consumer/worker/corporate/environmental contexts.
  • The 1999 WTO Seattle meeting was a critical event in shaping the future of global trade.
  • Falling barriers in trade destroy manufacturing jobs in developed nations.
  • International businesses manage complex business issues differently compared to domestic businesses due to varied regulations and practices.

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Description

This quiz explores the roles and functions of major global economic institutions like the World Bank and UN, as well as the implications of trade agreements and policies. It covers key historical events like the Uruguay Round and the financial crisis of 2008-2009. Test your knowledge of how these elements influence international trade and economic conditions.

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