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web.groovymark@gmail.com
- December 7, 2024
Question 21
Which financial instrument allows two parties to exchange currencies at a previously agreed exchange rate in the future?
a) Forward contract
b) Currency futures contract
c) Currency option contract
d) Currency swap contract
Answer: d) Currency swap contract
Explanation:
A currency swap contract involves two parties agreeing to exchange specific amounts of currency at a predetermined exchange rate on specified future dates, helping them manage currency risk.
Question 22
What is the main benefit of using a common market in economic integration?
a) Eliminating trade barriers with non-member countries
b) Allowing free movement of goods, services, capital, and labor between member countries
c) Standardizing currency among member countries
d) Centralizing political power within member countries
Answer: b) Allowing free movement of goods, services, capital, and labor between member countries
Explanation:
A common market not only removes trade barriers between member countries but also allows for the free movement of resources such as labor and capital, promoting economic collaboration.
Question 23
Which economic theory suggests that countries should specialize in producing goods where they have the lowest opportunity cost?
a) Mercantilism
b) Absolute advantage
c) Comparative advantage
d) Trade protectionism
Answer: c) Comparative advantage
Explanation:
The theory of comparative advantage posits that countries should focus on producing goods where they have the lowest opportunity cost, leading to more efficient production and mutually beneficial trade.
Question 24
What is the primary advantage of using blockchain technology in global business?
a) It facilitates faster currency exchange
b) It allows for transparent and secure transactions without intermediaries
c) It reduces transaction fees for international shipping
d) It improves customer relations in e-commerce
Answer: b) It allows for transparent and secure transactions without intermediaries
Explanation:
Blockchain technology enables secure, decentralized, and transparent transactions that do not require intermediaries, making it an attractive solution for businesses dealing with global transactions.
Question 25
Which economic measure represents the total market value of all goods and services produced within a country’s borders in a specific period?
a) Gross national product (GNP)
b) Balance of payments
c) Gross domestic product (GDP)
d) Consumer price index (CPI)
Answer: c) Gross domestic product (GDP)
Explanation:
Gross Domestic Product (GDP) is a key economic indicator that measures the total value of all goods and services produced within a country’s borders over a specific period, typically annually or quarterly.
Question 26
What is a common criticism of the World Bank?
a) It focuses too much on helping developed countries
b) It imposes conditions on loans that may harm developing countries
c) It only provides loans to large multinational corporations
d) It has no role in providing financial aid
Answer: b) It imposes conditions on loans that may harm developing countries
Explanation:
One criticism of the World Bank is that it often imposes strict conditions on the loans it provides to developing countries, which can lead to negative social and economic impacts in those countries.
Question 27
Which type of tariff is levied on imports to protect domestic industries by making foreign goods more expensive?
a) Revenue tariff
b) Specific tariff
c) Protective tariff
d) Ad valorem tariff
Answer: c) Protective tariff
Explanation:
A protective tariff is imposed to shield domestic industries from foreign competition by making imported goods more expensive, encouraging consumers to buy domestically produced goods.
Question 28
What is a primary objective of environmental sustainability initiatives in global business?
a) To reduce the cost of production
b) To minimize the environmental impact of business operations
c) To increase shareholder value
d) To improve relations with local governments
Answer: b) To minimize the environmental impact of business operations
Explanation:
Environmental sustainability initiatives aim to reduce the negative impact of business activities on the environment, focusing on sustainable resource use, pollution reduction, and overall environmental stewardship.
Question 29
What is a significant disadvantage of direct exporting as a global expansion strategy?
a) High transportation costs
b) Limited market control
c) High initial investment
d) Need for intermediaries
Answer: a) High transportation costs
Explanation:
Direct exporting can involve significant transportation and logistics costs, particularly when shipping goods to distant markets, which can reduce profit margins for businesses.
Question 30
Which legal system relies heavily on precedents set by judicial decisions?
a) Civil law
b) Common law
c) Religious law
d) Customary law
Answer: b) Common law
Explanation:
In common law systems, judicial decisions made in earlier cases (precedents) are used to guide rulings in similar cases, making it a flexible system that evolves with societal changes.
Question 31
Which type of regional economic integration allows member countries to set their own trade policies with non-member countries?
a) Customs union
b) Free trade area
c) Common market
d) Economic union
Answer: b) Free trade area
Explanation:
In a free trade area, member countries eliminate trade barriers between themselves but maintain their own trade policies, including tariffs, with non-member countries.
Question 32
What is the primary purpose of using a currency option contract in international business?
a) To hedge against currency depreciation
b) To speculate on future exchange rate movements
c) To minimize tax liabilities
d) To invest in foreign currencies
Answer: a) To hedge against currency depreciation
Explanation:
Currency option contracts give businesses the right, but not the obligation, to exchange currency at a specific rate on a future date, allowing them to protect themselves against unfavorable currency movements.
Question 33
Which agreement, established in 1988, focuses on promoting economic growth and political stability in South America?
a) NAFTA
b) MERCOSUR
c) ASEAN
d) CAFTA-DR
Answer: b) MERCOSUR
Explanation:
MERCOSUR is a regional trade agreement in South America that aims to promote economic growth, political stability, and cooperation among member countries through the reduction of trade barriers.
Question 34
What is the main function of the International Monetary Fund (IMF)?
a) To promote international monetary cooperation and stability
b) To oversee the enforcement of international labor standards
c) To provide development loans to poor countries
d) To regulate global trade policies
Answer: a) To promote international monetary cooperation and stability
Explanation:
The IMF promotes global monetary cooperation and financial stability by providing financial assistance to countries facing balance of payments problems and advising on economic policies.
Question 35
Which pricing strategy involves setting a low initial price to quickly attract customers and gain market share?
a) Penetration pricing
b) Price skimming
c) Premium pricing
d) Psychological pricing
Answer: a) Penetration pricing
Explanation:
Penetration pricing is a strategy where a low initial price is set to attract customers and gain market share quickly. Once the business establishes its presence, the price may be gradually increased.
Question 36
What is the purpose of a balance of payments in international trade?
a) To track the total value of all goods and services produced by a country
b) To record all economic transactions between a country and the rest of the world
c) To determine the exchange rate of a country’s currency
d) To calculate the level of inflation within a country
Answer: b) To record all economic transactions between a country and the rest of the world
Explanation:
The balance of payments is an accounting record of all economic transactions between a country and other countries, including exports, imports, financial transfers, and investments.
Question 37
What is a characteristic of a perfectly competitive market?
a) Many buyers and sellers with no control over prices
b) Few sellers and high barriers to entry
c) Sellers have control over market prices
d) Only one producer dominates the market
Answer: a) Many buyers and sellers with no control over prices
Explanation:
In a perfectly competitive market, there are many buyers and sellers, and no individual actor has enough market power to influence the price of goods or services. Prices are determined by supply and demand.
Question 38
What is the main goal of antitrust laws?
a) To protect consumers from unfair business practices
b) To promote international trade agreements
c) To encourage monopolies in domestic markets
d) To regulate environmental standards for businesses
Answer: a) To protect consumers from unfair business practices
Explanation:
Antitrust laws are designed to prevent monopolies and promote competition, ensuring that consumers benefit from fair prices and choices in the marketplace.
Question 39
What is a primary feature of a common law legal system?
a) Laws are codified in legal statutes
b) Judicial decisions serve as precedents for future cases
c) Laws are based on religious principles
d) Local customs dictate legal rulings
Answer: b) Judicial decisions serve as precedents for future cases
Explanation:
In common law systems, judicial rulings made in previous cases (precedents) are used as references for deciding future legal disputes, allowing for legal consistency over time.
Question 40
What is the primary purpose of tariffs in international trade?
a) To encourage imports from other countries
b) To raise revenue for the government
c) To protect domestic industries from foreign competition
d) To regulate international financial transactions
Answer: c) To protect domestic industries from foreign competition
Explanation:
Tariffs are taxes imposed on imported goods to protect domestic industries by making foreign products more expensive, encouraging consumers to buy local products instead.
