WGU C211 GLOBAL ECONOMICS FOR
MANAGERS 202 EXAM REVIEW STUDY NOTES
◉ Firms prefer FDI to licensing because FDI_____.
Answer: provides the firm with direct ownership to its foreign assets
◉ Which of the following political perspectives maintains the view
that FDI has both pros and cons and can only be approved when its
benefits outweigh costs?
Answer: Pragmatic nationalism
◉ Which of the following is a benefit of FDI to home countries?
Answer: Learning from operations
◉ Which of the following foreign exchange transactions provide
protection to traders and investors from being exposed to
fluctuations of the spot rate?
Answer: Forward transactions
◉ _____ is defined as the conversion of one currency into another at
Time 1, with an agreement to revert it back to the original currency
at a specific Time 2 in the future.
Answer: Currency swap
,◉ Foreign exchange rates are influenced by:
Answer: Interest rates and money supply.
Relative price differences and purchasing power parity.
Supply and demand of the currencies.
◉ A savvy global business manger must understand the following
concepts to be considered literate about foreign exchange:
Answer: Understand the factors that influence exchange rates
Understand the ways to hedge currency risks
Understand the foreign exchange market
◉ Which of the following are the primary types of foreign exchange
transactions made by financial companies?
Answer: Swaps, spot transactions, forward transactions
◉ A home appliance manufacturer located in The Netherlands
decides to open two new manufacturing plants, one in Poland and
the other in Thailand. Its purpose is to offset currency losses
through:
Answer: strategic hedging
,◉ Why do managers, at some of the largest global corporations, fail
to engage in currency hedging?
Answer: They believe that the protection against fluctuations in
exchange rates is not worth the potentially high cost of currency
hedging.
◉ Risk analysis of any country must include an analysis of the
country's:
Answer: currency risks
◉ With regard to foreign market entry, the resource-based view
argues that foreign firms need to
Answer: deploy overwhelming resources and capabilities to offset
their liability of foreignness.
◉ Which of the following is a first-mover advantage?
Answer: Avoidance of clash with a dominant firm at home
◉ Which of the following is an equity mode of entry?
Answer: Wholly owned subsidiaries
◉ Which of the following entry modes is a type of strategic alliance?
Answer: Licensing
, ◉ Which of the following is a disadvantage of licensing and
franchising?
Answer: Little control over marketing
◉ Miami is an ideal city for both North American firms looking to
expand their business to Central and South America and for Latin
American companies to expand their business to North America.
This is an example of a(n):
Answer: location-specific advantage.
◉ The following are examples of location-specific advantages:
Answer: Industry demand that creates a skilled labor force.
Industry demand that facilitates a pool of specialized suppliers and
buyers.
Knowledge spillovers among closely located firms.
◉ Which of the following is a first-mover advantage?
Answer: Avoid clashing with dominant firms in their home market.
◉ Which of type of entry mode is a wholly owned subsidiary?
Answer: Equity mode
MANAGERS 202 EXAM REVIEW STUDY NOTES
◉ Firms prefer FDI to licensing because FDI_____.
Answer: provides the firm with direct ownership to its foreign assets
◉ Which of the following political perspectives maintains the view
that FDI has both pros and cons and can only be approved when its
benefits outweigh costs?
Answer: Pragmatic nationalism
◉ Which of the following is a benefit of FDI to home countries?
Answer: Learning from operations
◉ Which of the following foreign exchange transactions provide
protection to traders and investors from being exposed to
fluctuations of the spot rate?
Answer: Forward transactions
◉ _____ is defined as the conversion of one currency into another at
Time 1, with an agreement to revert it back to the original currency
at a specific Time 2 in the future.
Answer: Currency swap
,◉ Foreign exchange rates are influenced by:
Answer: Interest rates and money supply.
Relative price differences and purchasing power parity.
Supply and demand of the currencies.
◉ A savvy global business manger must understand the following
concepts to be considered literate about foreign exchange:
Answer: Understand the factors that influence exchange rates
Understand the ways to hedge currency risks
Understand the foreign exchange market
◉ Which of the following are the primary types of foreign exchange
transactions made by financial companies?
Answer: Swaps, spot transactions, forward transactions
◉ A home appliance manufacturer located in The Netherlands
decides to open two new manufacturing plants, one in Poland and
the other in Thailand. Its purpose is to offset currency losses
through:
Answer: strategic hedging
,◉ Why do managers, at some of the largest global corporations, fail
to engage in currency hedging?
Answer: They believe that the protection against fluctuations in
exchange rates is not worth the potentially high cost of currency
hedging.
◉ Risk analysis of any country must include an analysis of the
country's:
Answer: currency risks
◉ With regard to foreign market entry, the resource-based view
argues that foreign firms need to
Answer: deploy overwhelming resources and capabilities to offset
their liability of foreignness.
◉ Which of the following is a first-mover advantage?
Answer: Avoidance of clash with a dominant firm at home
◉ Which of the following is an equity mode of entry?
Answer: Wholly owned subsidiaries
◉ Which of the following entry modes is a type of strategic alliance?
Answer: Licensing
, ◉ Which of the following is a disadvantage of licensing and
franchising?
Answer: Little control over marketing
◉ Miami is an ideal city for both North American firms looking to
expand their business to Central and South America and for Latin
American companies to expand their business to North America.
This is an example of a(n):
Answer: location-specific advantage.
◉ The following are examples of location-specific advantages:
Answer: Industry demand that creates a skilled labor force.
Industry demand that facilitates a pool of specialized suppliers and
buyers.
Knowledge spillovers among closely located firms.
◉ Which of the following is a first-mover advantage?
Answer: Avoid clashing with dominant firms in their home market.
◉ Which of type of entry mode is a wholly owned subsidiary?
Answer: Equity mode
