Multiple Choice Answers

1. The market consisting of all stocks bought and sold outside the issuer’s home country is called the ________.
Eurocurrency market
international equity market
foreign exchange market
international bond market

2. ________ involves using taxes and government spending to influence the money supply indirectly.
Monetary policy
Domestic policy
The law of one price
Fiscal policy

3. Purchasing power parity is better at predicting ________ exchange rates.
European
short-term
spot
long-term

4. A contract between the exporter and shipper that specifies merchandise destination and shipping costs is called a ________.
draft
bill of lading
letter of credit
bill of exchange

5. Which of these is the relative ability of two countries’ currencies to buy the same “basket” of goods in those two countries?
Fisher effect
Law of one price
Purchasing power parity
Cross rates

6. The likelihood that a society will undergo political changes that negatively affect local business activity is known as ________.
business risk
investment risk
political risk
production risk

7. Which of the following is NOT a method of export/import financing
Documentary collection
Letter of credit
Buyback
Open account

8. When the U.S. government lowers taxes, this is an example of ________.
fiscal policy
monetary policy
domestic policy
the law of one price

9. In countries with high illiteracy rates, a(n) ________ should not be used to collect information.
personal interview
observation of behavior
written survey
group interview

10. A promotional strategy designed to create buyer demand that will encourage channel members to stock a company’s product is called a(n) ________.
pull strategy
end distribution strategy
push strategy
up-channel strategy

11. Which of the following is an example of a legal force that might influence a site location decision?
Strong work ethic
Strict environmental regulations
Qualified workforce
Liquidity problems

12. When a government buys its own securities on the open market,
tax rates decline
the money supply increases
the nation’s productivity increases
it encourages FDI outflow

13. A distribution channel in which a manufacturer grants the right to sell its products to only one or a limited number of resellers is called a(n) ________.
intensive channel
push strategy channel
exclusive channel
pull strategy channel

14. In which type of joint venture do the parties choose to invest together in downstream business activities?
Backward integration
Multistage
Forward integration
Buyback

15. Which of the following financing methods entails the greatest risk for importers?
Documentary collection
Advance payment
Letter of credit
Open account

16. Manufacturers of products that are commonly sold through department and grocery stores often use a(n) ________.
pull strategy
exclusive channel strategy
push strategy
value chain strategy

17. The process of sending messages about products to target markets is called ________.
promotion mix
distribution policy
value density
marketing communication

18. Developing a market-potential indicator for an emerging market is useful to companies considering ________ .
exporting
licensing
joint ventures
wholly owned subsidiaries

19. The process of obtaining information that already exists within the company or that can be obtained from outside sources is called ________.
secondary market research
logistics management
primary market research
invalid market research

20. To insure against potential losses that result from adverse changes in exchange rates, Trader’s Paradise should use currency ________.
conversion
speculation
hedging
arbitrage