International Business Exam CECECN2A.1

<p>Canada has the absolute advantage in wine and the comparative advantage in shirts; Italy the absolute advantage in shirts and the comparative advantage in wine. (C)</p> Signup and view all the answers

<p>Zero for both countries. (D)</p> Signup and view all the answers

<p>Refuse, because the terms of trade are not fair for Canada. (C)</p> Signup and view all the answers

<p>Technical, health or environmental standards. (C)</p> Signup and view all the answers

<p>credit in the financial account. (A)</p> Signup and view all the answers

<p>21 percent of GDP. (D)</p> Signup and view all the answers

<p>-1 percent of GDP. (D)</p> Signup and view all the answers

<p>A country's trade balance represents the difference between its total exports and imports of goods and services during a specific period. In contrast, the current account encompasses not only the trade balance but also net income flows from abroad (including wages, investment income, and remittances) and net transfers (such as foreign aid and donations).</p> Signup and view all the answers

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

<p>First, ASEAN countries serve as a significant market for Chinese manufactured goods, particularly consumer products and electronics. Second, ASEAN's role as part of China's supply chain for global exports plays a considerable role. China utilizes ASEAN countries for intermediate production and components, contributing to a larger export market beyond the region.</p> Signup and view all the answers

<p>One plausible explanation is the ongoing trade tensions between the US and China. These tensions have led to increased tariffs and other trade restrictions, which have impacted the competitiveness of Chinese exports in the US market. In contrast, trade relations between China and the EU have been relatively stable, allowing for continued growth in exports to the European Union.</p> Signup and view all the answers

<p>A Free Trade Agreement (FTA) eliminates tariffs and other trade barriers between member countries, allowing for free trade in goods and services. However, an Economic Union goes beyond free trade by establishing common policies in areas such as currency, monetary policy, fiscal policy, and labor market regulations. It involves a deeper level of integration and economic cooperation among member states.</p> Signup and view all the answers

<p>This means that ASEAN countries primarily serve as production hubs or manufacturing centers for Chinese companies. Instead of simply exporting finished goods directly to consumers in ASEAN countries, China uses them as vital parts of its supply chain to produce components or intermediate products that are then assembled and exported to other destinations worldwide.</p> Signup and view all the answers

<p>Foreign Direct Investments (FDI) involve acquiring a substantial ownership stake in a foreign company or asset, providing active control and influence. Portfolio Investments, on the other hand, represent passive investments in financial claims (e.g., stocks or bonds) of foreign companies. For example, acquiring a controlling stake in a German automobile manufacturer would represent FDI, while buying shares of a Japanese technology firm listed on the Tokyo Stock Exchange reflects a portfolio investment.</p> Signup and view all the answers

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

<p>The graph shows that the EU imports 80 billion bushels of soybeans before the tariff is implemented.</p> Signup and view all the answers

<p>Before the tariff, consumer surplus is represented by the area of the triangle above the world price of $12 and below the demand curve, which is (0.5 * (14 - 12) * 80 = 80) (billion dollars). Producer surplus is the area of the triangle below the world price of $12 and above the supply curve, which is (0.5 * (12 - 10) * 80 = 80) (billion dollars). After the tariff, consumer surplus is (0.5 * (12 - 14) * 40 = -40) (billion dollars). Producer surplus is (0.5 * (14 - 10) * 40 = 80) (billion dollars). The tariff thus causes consumer surplus to decrease by 120 billion dollars and producer surplus to increase by 0 billion dollars. The net change is 120 billion dollars.</p> Signup and view all the answers

<p>The direct government receipts from the tariff are calculated as the area of the rectangle between the world price of $10 and the domestic price of $14, which is (( 14 - 10 ) * 40 = 160) (billion dollars).</p> Signup and view all the answers

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

<p>The article states that the SNB has been fighting deflation and has opted for a very accommodating monetary policy, which includes lowering interest rates. However, the article also clarifies that after several years of accommodative monetary policy, the SNB started increasing interest rates to combat inflation in June of 2022. As such, the rise in Swiss interest rates actually coincides with the recent appreciation of the Swiss franc, suggesting that it is not the cause of the appreciation.</p> Signup and view all the answers

<p>Firstly, the SNB's intervention in the foreign exchange market, by buying Swiss francs to support its value, can drive its appreciation. Secondly, the rise in Swiss interest rates, combined with a relatively stable economic situation and low inflation in Switzerland, can attract foreign investors seeking higher returns, thus increasing demand for the Swiss franc and raising its value.</p> Signup and view all the answers

<p>A strong currency makes imported goods cheaper for domestic consumers, putting downward pressure on prices. When a country's currency appreciates, it can import goods from other countries for less, which can help to moderate inflationary pressures. For example, if the Swiss franc strengthens against the euro, imported goods from Europe become less expensive in Switzerland.</p> Signup and view all the answers

<p>A flexible exchange rate system means that a currency's value fluctuates freely in the foreign exchange market without any direct intervention from the central bank. In contrast, fixed exchange rates, where a currency's value is pegged to another currency or a basket of currencies, and managed float systems, where the central bank intervenes to moderate fluctuations, are alternative exchange rate systems.</p> Signup and view all the answers

<p>Currency market intervention refers to a central bank's actions to influence the exchange rate of its currency. The Swiss National Bank can intervene in the foreign exchange market by buying Swiss francs. This directly increases demand for the Swiss franc, pushing up its value against other currencies. In effect, the SNB would be using its reserves of foreign currencies to buy Swiss francs, injecting the money into the market and increasing its value.</p> Signup and view all the answers

<p>According to ING, the EUR/CHF exchange rate is expected to move from 0.9950 to 0.95 next spring, representing a 4.5% appreciation of the Swiss franc. The calculation is (0.9950 - 0.95) / 0.9950 = 0.045, which equates to a 4.5% appreciation.</p> Signup and view all the answers

A situation where a company hires another company, often in a different country, to perform certain tasks or services, such as software development.

A type of foreign direct investment where a company invests in a company in another country that operates in the same industry (e.g., a car manufacturer investing in a car factory in another country).

A type of foreign direct investment where a company invests in a company in another country that operates in a different but related industry (e.g., a car manufacturer investing in a tire manufacturer in another country).

The practice of relocating business processes, such as manufacturing or customer service, to another country, often for cost reduction or access to specialized skills.

A principle of the World Trade Organization (WTO) that requires member countries to apply the same trade rules to all other WTO members, preventing them from granting special favors to specific countries.

The ability of a country to produce a good or service using fewer resources than another country.

The ability of a country to produce a good or service at a lower opportunity cost than another country.

A measure of the degree of trade liberalization between two countries. It shows the percentage of trade in a specific good that is not affected by trade barriers.

A situation where a country can produce a good or service at a lower opportunity cost than another country. This makes it beneficial for both countries to specialize in producing the good or service they have a comparative advantage in and then trade with each other.

A government policy that restricts the amount of a good that can be imported into a country.

Government regulations that specify certain technical, health, or environmental standards that imported goods must meet before they can be sold in a country.

A record of all economic transactions between a country and the rest of the world over a specific period.

A component of the Balance of Payments that captures the flows of goods, services, income, and unilateral transfers between a country and the rest of the world.

A component of the Balance of Payments that captures the flows of financial assets and liabilities between a country and the rest of the world.

A part of the Financial Account that reflects the difference between a country's credits and debits related to its trade balance.

An investment made by a company that gives it control over a company or asset in another country.

An investment made in financial assets, such as stocks or bonds, in another country without seeking control or ownership of a company.

A type of regional trade agreement where members eliminate tariffs and other trade barriers on goods traded between them.

A type of regional trade agreement that involves economic integration beyond just trade, often including common policies on labor, environmental regulations, and monetary policy.

A situation where goods are produced in different parts of the world and then assembled or finished in another country, often for cost reduction or access to specialized skills.

The difference between the value of a country's exports and imports of goods and services.

The amount by which a country's imports exceed its exports.

A government policy that imposes a tax on imported goods.

The satisfaction that consumers derive from consuming a good or service.

The difference between the price producers receive for a good or service and the minimum price they are willing to accept.

The income that a government collects from tariffs.

The overall well-being of a country, often measured by factors such as economic output, consumer satisfaction, and environmental sustainability.

A system where the value of a currency is determined by market forces, meaning that exchange rates fluctuate freely based on supply and demand.

A system where the value of a currency is fixed to another currency or to a basket of currencies. The central bank of the country must intervene in the foreign exchange market to maintain the fixed rate.

Actions taken by a central bank to influence the exchange rate of a currency. This can involve buying or selling foreign currencies in the foreign exchange market to increase or decrease demand for the domestic currency.

The process of a central bank purchasing its own currency, increasing demand for the domestic currency and potentially causing it to appreciate.