Professional Nursing - Concepts & Challenges, 9th Edition by Beth Black – Complete Test Bank (2024)

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,CHAPTER 1 2p




GLOBALIZATION AND THE MULTINATIONAL FIRM 2p 2p 2p 2p




ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS
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QUESTIONS

1. Why is it important to study international financial management?
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Answer: We are now living in a world where all the major economic functions, such as con
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sumption, production, investment, and financing, are highly globalized.
2p 2p 2p 2p 2p 2p 2p 2 p It is thus essential
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for financial managers to fully understand vital international dimensions of financial manage
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ment. This global shift is in marked contrast to a situation that existed when the authors of
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this book were learning finance a few decades ago. At that time, most professors customari
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ly (and safely, to some extent) ignored international aspects of finance.
2p 2p 2p 2p 2p 2p 2p 2p 2p 2p 2 p This mode of oper
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ation has become untenable since then.
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2. How is international financial management different from domestic financial management?
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Answer: There are three major dimensions that set apart international finance from domest
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ic finance. They are:
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1. foreign exchange and political risks,
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2. market imperfections, and 2p 2p



3. expanded opportunity set. 2p 2p




3. Discuss the major trends that have prevailed in international business during the last
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two decades.
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Answer: The 2000s brought a rapid integration of international capital and financial market
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s. Impetus for globalized financial markets initially came from the governments of major cou
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ntries that had begun to deregulate their foreign exchange and capital markets. The econo
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mic




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,integration and globalization that began in the eighties and nineties are picking up speed in
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2p the 2000s. Trade liberalization and economic integration continued to proceed at both the
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regional and global levels. Despite sovereign debt crisis in Europe, more EU member coun
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tries have adopted the common currency, the euro, that effectively became the second glo
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bal currency after the U.S. dollar. In the last few years, however, economic nationalism has
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2p been gaining some popularity, as exemplified by the Brexit decision of the United Kingdom
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and the so-called
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―America First‖ policies of the Trump Administration. To the extent that economic nationalis
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m is a populist response to the global financial crisis and Great Recession, it may subside
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as the world economy continues to recover.
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4. How is a country‘s economic well-
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being enhanced through free international trade in goods and services?
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Answer: According to David Ricardo, with free international trade, it is mutually beneficial f
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or two countries to each specialize in the production of the goods that it can produce relati
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vely most efficiently and then trade those goods. By doing so, the two countries can incre
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ase their combined production, which allows both countries to consume more of both good
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s. This argument remains valid even if a country can produce both goods more efficiently i
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n absolute terms than the other country. International trade is not a ‗zero-
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sum‘ game in which one country benefits at the expense of another country. Rather, interna
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tional trade could be an ‗increasing- sum‘ game from which all players become winners.
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5. What considerations might limit the extent to which the theory of comparative advantag
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e is realistic?
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Answer: The theory of comparative advantage was originally advanced by the nineteenth
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century economist David Ricardo as an explanation for why nations trade with one another
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. The theory claims that economic well-
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being is enhanced if each country produces what it has a comparative advantage in produ
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cing relative to other countries, and then trade products.
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Underlying the theory are the assumptions of free trade between nations and that the facto
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rs of production (labor, technological know-
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how, and capital) are relatively immobile. To the extent that these assumptions do not hol
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d, the theory of comparative advantage may not realistically describe international trade. In
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2p addition, free trade produces winners and losers and if the losers are not compensated, fr
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ee trade may faces political opposition from them.
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, 6. What are multinational corporations (MNCs) and what economic roles do they play?
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