WGU C211 GLOBAL ECONOMICS FOR
MANAGERS 202 EXAMPREP QUESTIONS AND
DETAILED SOLUTIONS
◉ How are supply and demand related to the exchange rate of a
country.
Answer: The price of a commodity, a country's currency, is
fundamentally determined by this. Strong demand leads to price
hikes; oversupply results in price drops.
◉ Which theory came first.
Answer: Mercantilism (although both are of the idea that
governments should actively protect domestic industries from
imports and vigorously promote exports)
◉ If a company seeks to limit foreign exchange rate exposure in the
forward direction, what is the most effective way to do this?.
Answer: Forward transactions, an act know as currency hedging.
◉ Transaction risk.
Answer: The exchange rate risk associated with the time delay
between entering into a contract and settling it.
,◉ Hedging.
Answer: A transaction, such as forward transactions, that protects
traders and investors from exposure to the fluctuations of the spot
rate.
◉ Currency hedging.
Answer: A way to protect traders and investors from being exposed
to the fluctuations of the spot rate
◉ Strategic hedging.
Answer: A means of spreading out activities in different currency
zones in order to offset the currency losses in certain regions
through gains in other regions (currency diversification)
◉ First mover advantages.
Answer: Proprietary, technological leadership, pre-emption of scarce
resources, establishment of entry barriers to late entrants,
avoidance of clash with dominant firms at home, relationships with
key stakeholders, (such as governments.)
◉ Late mover advantages.
Answer: Opportunity to free ride on first-mover investments,
Resolution of technological and market uncertainty, First mover's
difficulty to adapt to market changes.)
, ◉ Foreign market entries types.
Answer: Non-equity and equity
◉ Non-equity.
Answer: Reflects relatively smaller commitments to overseas
markets. Determines firms MNE status.
◉ Equity.
Answer: indicative of relatively larger, harder-to-reverse
commitments. Determines firms MNE status.
◉ How do institutions reduce uncertainty?.
Answer: Establish "rules of the game" that economic players play by.
A standard to follow in order to survive and prosper. By signaling
which conduct is legitimate and which is not, institutions constrain
the range of acceptable actions.
◉ Regulatory pillar.
Answer: The coercive power of governments (laws, regs, rules)
◉ Normative pillar.
MANAGERS 202 EXAMPREP QUESTIONS AND
DETAILED SOLUTIONS
◉ How are supply and demand related to the exchange rate of a
country.
Answer: The price of a commodity, a country's currency, is
fundamentally determined by this. Strong demand leads to price
hikes; oversupply results in price drops.
◉ Which theory came first.
Answer: Mercantilism (although both are of the idea that
governments should actively protect domestic industries from
imports and vigorously promote exports)
◉ If a company seeks to limit foreign exchange rate exposure in the
forward direction, what is the most effective way to do this?.
Answer: Forward transactions, an act know as currency hedging.
◉ Transaction risk.
Answer: The exchange rate risk associated with the time delay
between entering into a contract and settling it.
,◉ Hedging.
Answer: A transaction, such as forward transactions, that protects
traders and investors from exposure to the fluctuations of the spot
rate.
◉ Currency hedging.
Answer: A way to protect traders and investors from being exposed
to the fluctuations of the spot rate
◉ Strategic hedging.
Answer: A means of spreading out activities in different currency
zones in order to offset the currency losses in certain regions
through gains in other regions (currency diversification)
◉ First mover advantages.
Answer: Proprietary, technological leadership, pre-emption of scarce
resources, establishment of entry barriers to late entrants,
avoidance of clash with dominant firms at home, relationships with
key stakeholders, (such as governments.)
◉ Late mover advantages.
Answer: Opportunity to free ride on first-mover investments,
Resolution of technological and market uncertainty, First mover's
difficulty to adapt to market changes.)
, ◉ Foreign market entries types.
Answer: Non-equity and equity
◉ Non-equity.
Answer: Reflects relatively smaller commitments to overseas
markets. Determines firms MNE status.
◉ Equity.
Answer: indicative of relatively larger, harder-to-reverse
commitments. Determines firms MNE status.
◉ How do institutions reduce uncertainty?.
Answer: Establish "rules of the game" that economic players play by.
A standard to follow in order to survive and prosper. By signaling
which conduct is legitimate and which is not, institutions constrain
the range of acceptable actions.
◉ Regulatory pillar.
Answer: The coercive power of governments (laws, regs, rules)
◉ Normative pillar.
