Chapter: Introduction to International Trade
1.

What are the four factor endowments?

A. national resources, labor, physical capital and human capital
B. types of technology
C. material inputs used up in the process of production
D. international differences in climate
Answer» A. national resources, labor, physical capital and human capital
2.

The Heckscher- Ohlin model is principally focused on what aspect of economics?

A. international trade
B. supply and demand
C. normative economics
D. production possibility frontier
Answer» A. international trade
3.

A no-trade world will have which of the following characteristics:

A. countries will have same relative endowments of production factors
B. consumers across countries will have identical and homogenous tastes
C. there will be no distortions or externalities
D. all of the above
Answer» D. all of the above
4.

Transportation cost of trade affects:

A. pattern of trade
B. boundaries between tradable and non-tradable goods
C. global supply chains
D. all of the above
Answer» D. all of the above
5.

International Trade is most likely to generate short-term unemployment in:

A. industries in which there are neither imports nor exports
B. import-competing industries
C. industries that sell to domestic and foreign buyers.
D. industries that sell to only foreign buyers
Answer» B. import-competing industries
6.

What was the first economic theory of international trade to be developed?

A. the theory of mercantilism
B. the theory of comparative advantage
C. the theory of absolute advantage
D. the heckscher-ohlin theory
Answer» A. the theory of mercantilism
7.

According to Adam Smith, the trade between countries should happen _____.

A. naturally according to the market forces
B. under government regulation
C. using factors that are available
D. only when a country has an absolute advantage
Answer» D. only when a country has an absolute advantage
8.

If a nation has an open economy it means that the nation:

A. allows private ownership of capital.
B. has flexible exchange rates
C. has fixed exchange rates
D. conducts trade with other countries
Answer» D. conducts trade with other countries
9.

International trade forces domestic firms to become more competitive in terms of

A. the introduction of new products
B. product design and quality
C. product price
D. all of the above
Answer» D. all of the above
10.

The movement to free international trade is most likely to generate short-term unemployment in which industries

A. industries in which there are neither imports nor exports
B. import-competing industries.
C. industries that sell to domestic and foreign buyers
D. industries that sell to only foreign buyers
Answer» B. import-competing industries.
11.

According to the principle of comparative advantage:

A. south korea should export steel
B. south korea should export steel and dvds
C. japan should export steel
D. japan should export steel and dvds
Answer» A. south korea should export steel
12.

Country A has an absolute advantage in

A. product x
B. product y
C. neither x nor y
D. both x and y
Answer» B. product y
13.

Globalization refers to:

A. lower incomes worldwide
B. less foreign trade and investment
C. global warming and their effects
D. a more integrated and interdependent world
Answer» D. a more integrated and interdependent world
14.

Comparative Cost Trade Theory is given by

A. adam smith
B. david ricardo
C. gottfried haberle
D. heckscher ohlin
Answer» B. david ricardo
15.

……………...is the payment method most often used in International Trade which offers the exporter best assurance of being paid for the products sold internationally.

A. bill of lading
B. letter of credit
C. open account
D. drafts
Answer» B. letter of credit
16.

Key controllable factors in global marketing are:

A. government policy and legislation
B. social and technical changes
C. marketing activities and plans
D. all of the above.
Answer» C. marketing activities and plans
17.

The first phase of globalization started around 1870 and ended with …..

A. world war i
B. world war ii
C. the establishment of gatt
D. in 1913 when gdp was high
Answer» A. world war i
18.

According to this theory, the holdings of a country’s treasure primarily in the form of gold constituted its wealth.

A. gold theory
B. ricardo theory
C. mercantilism
D. hecksher theory
Answer» C. mercantilism
19.

The Theory of Absolute Cost Advantage is given by

A. david ricardo
B. adam smith
C. f w taylor
D. ohlin and heckscher
Answer» B. adam smith
20.

The Theory of Relative Factor Endowments is given by

A. david ricardo
B. adam smith
C. c. f w taussig
D. ohlin and hecksher
Answer» D. ohlin and hecksher
21.

The theory of comparative cost advantage is given by

A. david ricardo
B. adam smith
C. f w taussig
D. ohlin and heckscher
Answer» A. david ricardo
Chapter: Multinational Enterprises
22.

A multinational is a firm that controls and manages production facilities in

A. both developed and developing countries
B. at least two countries
C. one country but relies on multiple markets for the consumption of goods it produces
D. at least two developed countries and one developing country
Answer» B. at least two countries
23.

Locational advantages are based on which combination of the following specific country characteristics

A. a large reserve of natural resources, a large local market and efficiency opportunities
B. a small reserve of natural resources, a large local market and efficiency opportunities
C. a small reserve of natural resources, a small local market and efficiency opportunities
D. a large reserve of natural resources, a small local market and efficiency opportunities
Answer» A. a large reserve of natural resources, a large local market and efficiency opportunities
24.

Horizontal integration occurs when

A. firm creates singular country production facilities, each of which produces different good or goods
B. firm creates multiple production facilities, each of which produces the same good or goods.
C. firm creates multiple production facilities, each of which produces different good or goods
D. firm creates singular country facilities, each of which produces the same good or goods
Answer» B. firm creates multiple production facilities, each of which produces the same good or goods.
25.

Which of the following would be an example of foreign direct investment from the United States to Taiwan?

A. a u.s. bank buys bonds issued by a taiwan computer manufacturer.
B. a u.s. car manufacturer enters into a contract with a taiwan firm to make and sell it spark plugs.
C. microsoft hires a taiwanese computer programmer to debug some software for it.
D. the state of california rents space in taipei for one of its employees to use promoting tourism in
Answer» B. a u.s. car manufacturer enters into a contract with a taiwan firm to make and sell it spark plugs.
26.

If a German manufacturer of household appliances wants to take advantage of the cheaper labor available in the Czech Republic, which of the following actions will not serve that purpose?

A. build a manufacturing subsidiary there and employ czech workers.
B. build a plant in the czech republic and send all german workers to operate it.
C. license a czech firm to produce its products under its own label.
D. contract for a czech firm to do some of the processing for it.
Answer» B. build a plant in the czech republic and send all german workers to operate it.
27.

Which of the following was created in an effort to promote free trade?

A. world trade organization
B. the sarbanes-oxley act
C. multilateral development banks
D. the organization for economic cooperation and development
Answer» A. world trade organization
28.

. Removing barriers or restrictions set by the government is called:

A. liberalisation
B. investment
C. favorable trade
D. free trade
Answer» A. liberalisation
29.

Which is the right sequence of stages of Internationalization

A. domestic, transnational, global, international, multinational
B. domestic, international, multinational, global, transnational
C. domestic, multinational, international, transnational, global
D. domestic, international, transnational, multinational, global
Answer» B. domestic, international, multinational, global, transnational
30.

Subsidiaries consider the regional environment for policy / Strategy formulation is known as

A. polycentric approach
B. regionocentric approach
C. ethnocentric approach
D. geocentric approach
Answer» B. regionocentric approach
31.

. Which is not an Indian Multinational Company?

A. unilever
B. asian paints
C. piramal
D. wipro
Answer» A. unilever
32.

Select example of Indian Multinational Company

A. hindustan unilever
B. videocon
C. cargill
D. tesco
Answer» B. videocon
33.

…………………corporation produces in the home country or in a single country and focuses on marketing these products globally or vice a versa.

A. global
B. international
C. transnational
D. none of the above
Answer» A. global
34.

The —————-company produces, markets, invests and operates across the world

A. global
B. international
C. transnational
D. multinational
Answer» C. transnational
35.

Business across several countries with some decentralization of management decision making to subsidiaries is

A. global business.
B. multinational business.
C. transnational business.
D. multi-regional business.
Answer» B. multinational business.
36.

Immobility of labor among nations is

A. absolute.
B. relatively of a higher degree than among regions in the same country.
C. relatively easier than movement within the country.
D. of the same degree as within the country.
Answer» B. relatively of a higher degree than among regions in the same country.
37.

The following factor does not differentiate international business from domestic business

A. different currencies
B. product quality
C. product mobility
D. trade policies
Answer» B. product quality
38.

By entering into international business, a firm expects improvement in

A. marketing.
B. all spheres of marketing, operation and finance simultaneously.
C. any or all spheres of marketing, operation and finance.
D. finance only
Answer» C. any or all spheres of marketing, operation and finance.
Chapter: International finance
39.

Ultimately ………………was replaced by the …………….on 1st Jan 1995

A. gats, wto
B. wto, gatt
C. gatt, wto
D. imf, gatt
Answer» C. gatt, wto
40.

_______ is the first step in the internationalization process.

A. license
B. foreign investment
C. sales
D. export
Answer» A. license
41.

In the foreign exchange market, the ________ of one country is traded for the ________ of another country.

A. currency; currency
B. currency; financial instruments
C. currency; goods
D. goods; goods
Answer» A. currency; currency
42.

By definition, currency appreciation occurs when

A. the value of all currencies falls relative to gold.
B. the value of all currencies rises relative to gold.
C. the value of one currency rises relative to another currency.
D. the value of one currency falls relative to another currency
Answer» C. the value of one currency rises relative to another currency.
43.

Hedging is used by companies to:

A. decrease the variability of tax paid
B. decrease the spread between spot and forward market quotes
C. increase the variability of expected cash flows
D. decrease the variability of expected cash flows
Answer» D. decrease the variability of expected cash flows
44.

Exchange rates

A. are always fixed
B. fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied
C. fluctuate to equate imports and exports
D. fluctuate to equate rates of interest in various countries
Answer» B. fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied
45.

If the U.S. dollar appreciates relative to the British pound,

A. it will take fewer dollars to purchase a pound
B. it will take more dollars to purchase a pound
C. it is called a weakening of the dollar
D. both a & c
Answer» A. it will take fewer dollars to purchase a pound
46.

A floating exchange rate

A. is determined by the national governments involved
B. remains extremely stable over long periods of time
C. is determined by the actions of central banks
D. is allowed to vary according to market forces
Answer» D. is allowed to vary according to market forces
47.

In a quote exchange rate, the currency that is to be purchase with another currency is called the

A. liquid currency
B. foreign currency
C. local currency
D. base currency
Answer» D. base currency
48.

An economist will define the exchange rate between two currencies as the:

A. amount of one currency that must be paid in order to obtain one unit of another currency
B. difference between total exports and total imports within a country
C. price at which the sales and purchases of foreign goods takes place
D. ratio of import prices to export prices for a particular country
Answer» A. amount of one currency that must be paid in order to obtain one unit of another currency
49.

India is facing continuous deficit in its balance of payments. In the foreign exchange market rupee is expected to

A. depreciate.
B. appreciate.
C. show no specific tendency.
D. depreciate against currencies of the countries with positive balance of payment and appreciate against
Answer» A. depreciate.
50.

The demand for domestic currency in the foreign exchange market is indicated by the following transactions in balance of payment

A. export of goods and services
B. import of goods and services.
C. export of goods and services and capital inflows.
D. import of goods and services and capital outflows.
Answer» C. export of goods and services and capital inflows.
51.

The price at which a market maker is prepared to buy (a currency) or borrow (money) is termed as

A. spot rate
B. bid rate
C. ask price
D. forward rate
Answer» B. bid rate
52.

The __________ is especially well suited to offer hedging protection against transactions risk exposure.

A. forward market
B. spot market
C. transactions market
D. inflation-rate market
Answer» A. forward market
53.

Difference between buying and selling rates in an exchange rate is known as

A. strike price
B. spread
C. swap points
D. spot rate
Answer» B. spread
54.

Exchange rate between currency A and currency B, given the values of currencies A and B with respect to a third currency is known as

A. golden standard
B. flexible exchange rate
C. fixed exchange rate
D. cross exchange rate
Answer» D. cross exchange rate
55.

The swap arrangement where principal amounts are not exchanged, but periodical payments will be

A. currency swap
B. cross currency interest swap
C. interest rate swap.
D. non-financial swap.
Answer» C. interest rate swap.
56.

What is FEMA?

A. first exchange management act
B. foreign exchequer management act
C. foreign exchange management act
D. foreign evaluation management act
Answer» C. foreign exchange management act
57.

______________ involve the exchange of currency the second day after the date on which the two foreign exchange traders agree to the transaction.

A. spot transactions
B. outright forward transactions
C. fx swaps
D. reverse transactions
Answer» A. spot transactions
58.

Outright forward transactions involve the exchange of currency beyond three days at a fixed exchange rate, known as the:

A. spot rate.
B. forward rate
C. fx swap rate.
D. reverse transaction rate
Answer» B. forward rate
59.

The biggest market for foreign exchange is which of the following?

A. new york
B. tokyo
C. london
D. china
Answer» C. london
60.

The ______________ is the price at which the trader is willing to buy foreign currency.

A. offer
B. bid
C. spread
D. cross rate
Answer» B. bid
61.

Which of the following is the price at which the trader is willing to sell foreign currency?

A. bid
B. spread
C. offer
D. cross rate
Answer» C. offer
62.

.………is only a legal agreement and it is not an institution, but ….. is a permanent institution.

A. gatt, wto
B. wto, gatt
C. wto, imf
D. imf, gatt
Answer» A. gatt, wto
63.

The WTO was established to implement the final act of Uruguay Round agreement of ……

A. mfa
B. gatt
C. trip’s
D. uno
Answer» B. gatt
64.

WTO stands for

A. world technology association
B. world time organization
C. world trade organization
D. world tourism organization
Answer» C. world trade organization
65.

What is the name of the international organization that fosters monetary and financial cooperation and serves as a bank for central banks?

A. wto
B. eu
C. world bank
D. bank for international settlements
Answer» D. bank for international settlements
66.

Which of the following are institutional banks that provide financial support and professional advice for developing countries?

A. multilateral development banks
B. central banks
C. investment banks
D. barclays bank
Answer» A. multilateral development banks
67.

In the foreign exchange market, the ________ of one country is traded for the ________ of another country.

A. currency; currency
B. currency; financial instruments
C. currency; goods
D. goods; goods
Answer» B. currency; financial instruments
68.

Which of the following examples definitely illustrates a depreciation of the U.S. dollar?

A. the dollar exchanges for 1 pound and then exchanges for 1.2 pounds.
B. the dollar exchanges for 250 yen and then exchanges for 275 francs.
C. the dollar exchanges for 100 francs and then exchanges for 120 yen.
D. the dollar exchanges for 120 francs and then exchanges for 100 francs
Answer» D. the dollar exchanges for 120 francs and then exchanges for 100 francs
69.

Interest rate swaps are usually possible because international financial markets in different countries are

A. efficient
B. perfect
C. imperfect
D. both a & b
Answer» C. imperfect
70.

The exchange rate is the

A. total yearly amount of money changed from one country’s currency to another country’s currency
B. total monetary value of exports minus imports
C. amount of country’s currency which can exchanged for one ounce of gold
D. price of one country’s currency in terms of another country’s currency
Answer» D. price of one country’s currency in terms of another country’s currency
71.

A speculator in foreign exchange is a person who

A. buys foreign currency, hoping to profit by selling it a a higher exchange rate at some later date
B. earns illegal profit by manipulation foreign exchange
C. causes differences in exchange rates in different geographic markets
D. none of the above
Answer» A. buys foreign currency, hoping to profit by selling it a a higher exchange rate at some later date
72.

Under a gold standard,

A. a nation’s currency can be traded for gold at a fixed rate
B. a nation’s central bank or monetary authority has absolute control over its money supply
C. new discoveries of gold have no effect on money supply or prices
D. a & b
Answer» A. a nation’s currency can be traded for gold at a fixed rate
73.

The Bretton Woods accord

A. of 1879 created the gold standard as the basis of international finance
B. of 1914 formulated a new international monetary system after the collapse of the gold standard
C. of 1944 formulated a new international monetary system after the collapse of the gold standard
D. none of the above
Answer» C. of 1944 formulated a new international monetary system after the collapse of the gold standard
74.

The current system of international finance is a

A. gold standard
B. fixed exchange rate system
C. floating exchange rate system
D. managed float exchange rate system
Answer» D. managed float exchange rate system
75.

Ask quote is for

A. seller
B. buyer
C. hedger
D. speculator
Answer» A. seller
76.

A simultaneous purchase and sale of foreign exchange for two different dates is called

A. currency devalues
B. currency swap
C. currency valuation
D. currency exchange
Answer» B. currency swap
Chapter: Regional Economic Grouping
77.

The basic objective of export Promotion Council is to promote and develop the Exports of the

A. particular products of country
B. only attractive projects of the country
C. only services industry products of the country.
D. overall exports of the country.
Answer» D. overall exports of the country.
78.

The main promoter of trade liberalization was

A. gatt
B. nafta
C. cepta
D. cisa
Answer» A. gatt
79.

_______________ is an important reason for economic integration.

A. geographic proximity
B. democracy
C. totalitarianism
D. common law practice
Answer» A. geographic proximity
80.

In which of the following types of regional economic integration are internal tariffs eliminated with member countries levying a common external tariff on goods being imported from nonmembers.

A. customs union
B. free trade area
C. common market
D. complete economic integration
Answer» A. customs union
81.

A _______________ focuses on eliminating internal tariffs with member countries levying a common
external tariff on goods being imported from nonmembers. Additionally, this type of regional economic
integration allows free mobility of production factors such as labor and capital.

A. free trade area
B. common market
C. customs union
D. complete economic integration
Answer» B. common market
82.

_______________ occurs when production shifts to more efficient producers for reasons of
comparative advantage, allowing consumers access to more goods at a lower price than would have
been possible without integration.

A. trade diversion
B. divestment
C. trade creation
D. retrenchment
Answer» C. trade creation
83.

Which of the following was developed with the rationale that the U.S.-Canadian trade was the largest bilateral trade in the world and that the United States is Mexico’s and Canada’s largest trading partner?

A. cefta (the central european free trade agreement)
B. nafta (the north american free trade agreement)
C. asean (association of south east asian nations)
D. eu (the european union)
Answer» B. nafta (the north american free trade agreement)
84.

_______________ occurs when trade shifts to countries in the group at the expense of trade with
countries not in the group, even though the nonmember country might be more efficient in the absence
of trade barriers.

A. trade creation
B. divestment
C. retrenchment
D. trade diversion
Answer» D. trade diversion
85.

NAFTA calls for all of the following EXCEPT:

A. the harmonization of trade rules
B. the liberalization of restrictions on services
C. the implementation of a common currency
D. the liberalization of restrictions on foreign investment
Answer» C. the implementation of a common currency
86.

NAFTA is a good example of:

A. trade erosion.
B. divestment.
C. retrenchment.
D. trade diversion.
Answer» D. trade diversion.
87.

Where is the headquarters of the EU?

A. belgium
B. netherlands
C. luxembourg
D. greece
Answer» A. belgium
88.

Apart from India, Pakistan and Bangladesh who are the other member countries of SAARC?

A. nepal, bhutan, thailand and singapore
B. nepal, bhutan, malaysia and maldives
C. nepal, bhutan, maldives, sri lanka and afghanistan
D. none of the above
Answer» C. nepal, bhutan, maldives, sri lanka and afghanistan
89.

Which of the following is not the main purpose for formation of SAARC

A. to combat terrorism
B. to promote the welfare of the people of south asia
C. to form mutual defense against foreign aggression
D. none of the above
Answer» C. to form mutual defense against foreign aggression
90.

SAPTA is a trade agreement by _________________

A. asean nations
B. apec nations
C. saarc nations
D. eu nations
Answer» C. saarc nations
91.

What is the full form of ASEAN?

A. association of south east asian nations
B. administration of south east asian nations
C. administration of southern eastern asian nations
D. organisation of south east asian nations
Answer» A. association of south east asian nations
92.

The European Union is a free trade association that is based on a(n)

A. economic and monetary union.
B. economic union.
C. monetary union.
D. a commonly agreed upon list of lowered tariffs.
Answer» A. economic and monetary union.
93.

Which one of the following has a single currency managed by a common central bank?

A. asean
B. european union
C. world trade organization
D. the organization for economic cooperation and development
Answer» B. european union
94.

Which one of the following is renowned for its high-quality databases on economic and social data?

A. wto
B. eu
C. oecd
D. world bank
Answer» C. oecd
Chapter: India’s foreign Trade
95.

The main reason behind MNCs investments are

A. to benefit foreign countries
B. to provide financial support to the country’s government
C. for the welfare of underprivileged people.
D. to increase the assets and earn profits.
Answer» D. to increase the assets and earn profits.
96.

Which institute supports investments and foreign trade in India?

A. international monetary fund (imf)
B. world trade organisation (wto)
C. world bank
D. international labour organisation (ilo)
Answer» B. world trade organisation (wto)
97.

Within an international context, what are 'economies of scope' synonymous with?

A. decreased cost per unit of output.
B. buying components in bulk.
C. reusing a resource from one business/country in additional businesses/countries.
D. all of the above.
Answer» D. all of the above.
98.

According to the concept of the value chain, of an international firm is profitable if:

A. the value it commands exceeds the costs involved in creating the product
B. the value it commands is lower than the costs involved in creating the product
C. it operates in global industries
D. the value it commands equals the costs involved in creating the product.
Answer» A. the value it commands exceeds the costs involved in creating the product
99.

When Safeway supermarkets in the United States buys strawberries from Mexico,

A. it must use dollars to pay mexican farmers.
B. it may use any currency it chooses.
C. it must use pesos to pay mexican farmers.
D. the transaction shows up in the u.s. capital account.
Answer» C. it must use pesos to pay mexican farmers.
100.

A country records its international finance accounts in it’s

A. balance of payments accounts.
B. import/export log accounts.
C. trade payments accounts.
D. net exports payments account.
Answer» A. balance of payments accounts.
Tags
Question and answers in International Business, International Business multiple choice questions and answers, International Business Important MCQs, Solved MCQs for International Business, International Business MCQs with answers PDF download