WGU C211 GLOBAL ECONOMICS FOR MANAGERS - PRACTICE QUESTIONS COMPLETE WITH CORRECT ANSWERS AND DETAILED RATIONALE

WGU C211 GLOBAL ECONOMICS FOR MANAGERS - PRACTICE QUESTIONS COMPLETE WITH CORRECT ANSWERS AND DETAILED RATIONALE 1) Which of the following best defines gross domestic product (GDP)? A) The total value of all final goods and services produced within a country's borders in a specific time period B) The total value of all goods and services produced by a country's citizens regardless of location C) The total income earned by all citizens of a country D) The total value of all transactions that occur within a country's economy Correct Answer: A) GDP measures the value of final goods and services produced within a country's geographic borders during a specific period, distinguishing it from GNP which includes production by citizens abroad. ________________________________________ 2) A furniture manufacturer purchases $500 in wood, $200 in hardware, and pays $300 in labor to produce a dining table that sells for $2,000. What is the value added by this manufacturer? A) $2,000 B) $1,000 C) $1,300 D) $500 Correct Answer: C) Value added equals the final selling price ($2,000) minus the cost of intermediate inputs ($500 + $200 = $700), which equals $1,300. This represents the value the manufacturer contributed through production. ________________________________________ 3) What happens to a nation's imports and exports when its currency appreciates significantly? A) Imports become cheaper; exports become more expensive for foreign buyers B) Imports become more expensive; exports become cheaper for foreign buyers C) Both imports and exports become cheaper D) Both imports and exports become more expensive Correct Answer: A) Currency appreciation makes foreign goods cheaper for domestic consumers (increasing imports) while making domestic goods more expensive for foreign buyers (decreasing exports), potentially worsening the trade balance. ________________________________________ 4) A country with a comparative advantage in producing automobiles should: A) Produce automobiles and trade for other goods where it has a comparative disadvantage B) Produce all goods domestically to achieve self-sufficiency C) Import automobiles from countries with lower production costs D) Focus on producing goods where it has an absolute advantage Correct Answer: A) The principle of comparative advantage states that countries should specialize in producing goods where they have the lowest opportunity cost and trade for other goods, maximizing total production and consumption. ________________________________________ 5) Which of the following is NOT a component of GDP when using the expenditure approach? A) Consumption B) Investment C) Government spending D) Transfer payments Correct Answer: D) Transfer payments (welfare, social security) are not included in GDP because they represent transfers of income rather than payments for currently produced goods or services. ________________________________________ 6) A U.S. company builds a factory in Mexico and produces goods there. The value of these goods is counted in: A) U.S. GDP only B) Mexican GDP only C) Both U.S. and Mexican GDP D) Neither U.S. nor Mexican GDP Correct Answer: B) GDP measures production within a country's borders regardless of who owns the factors of production. Since the factory is in Mexico, the goods produced there count toward Mexican GDP, not U.S. GDP. ________________________________________ 7) What is the primary difference between the resource-based view and the institution-based view of global business? A) The resource-based view focuses on firm-specific capabilities while the institution-based view focuses on external rules and norms B) The resource-based view examines government policies while the institution-based view examines internal strengths C) The resource-based view advocates for globalization while the institution-based view advocates for localization D) There is no significant difference between these two views Correct Answer: A) The resource-based view emphasizes a firm's internal resources and capabilities as sources of competitive advantage, while the institution-based view focuses on how formal and informal rules of the game in different countries affect business strategy. ________________________________________ 8) According to the pendulum view of globalization, which statement is accurate? A) Globalization oscillates between periods of expansion and contraction B) Globalization is a recent phenomenon that will continue indefinitely C) Globalization has only moved in one direction throughout history D) Globalization ended completely after World War II Correct Answer: A) The pendulum view suggests that globalization is not a one-directional phenomenon but rather swings back and forth between greater integration and isolation throughout history, influenced by wars, economic policies, and technological changes.