WGU C211 OA GLOBAL ECONOMICS ACTUAL
QUESTIONS AND CORRECT ANSWERS
◉ According to the theory of absolute advantage, under free trade,
Answer: each nation gains by specializing in economic activities in
which a nation has absolute advantage.
◉ Which of the following is NOT a nontariff trade barrier (NTB)?
Answer: Cultural distance
◉ Protectionism is similar to mercantilism as they both advocated
_____.
Answer: government involvement in international trade
◉ OLI advantages refer to a firm's quest for _____via FDI.
Answer: ownership advantages, location advantages, and
internalization advantages
◉ MNEs' possession and leveraging of certain valuable, rare, hard-
to-imitate, and organizationally embedded (VRIO) assets overseas in
the context of FDI refer to _____.
Answer: ownership
,◉ 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
QUESTIONS AND CORRECT ANSWERS
◉ According to the theory of absolute advantage, under free trade,
Answer: each nation gains by specializing in economic activities in
which a nation has absolute advantage.
◉ Which of the following is NOT a nontariff trade barrier (NTB)?
Answer: Cultural distance
◉ Protectionism is similar to mercantilism as they both advocated
_____.
Answer: government involvement in international trade
◉ OLI advantages refer to a firm's quest for _____via FDI.
Answer: ownership advantages, location advantages, and
internalization advantages
◉ MNEs' possession and leveraging of certain valuable, rare, hard-
to-imitate, and organizationally embedded (VRIO) assets overseas in
the context of FDI refer to _____.
Answer: ownership
,◉ 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
