Fendy's Tale

True/False Questions

1. American FDI, used primarily for establishing foreign production plants, increased so much from 1995 to 2004 that, as a result, U.S. exports decreased during that period.

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2. Supplying overseas markets via exporting to them and producing in them is essential to most major U.S. corporations.

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3. International trade includes exports, imports and foreign direct investment.

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4. International firms must export their products or services in order to establish and expand their overseas operations.

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5. Foreign sourcing, exporting, and foreign production comprise the three ways that firms engage in international business.

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6. Foreign sourcing is the overseas procurement of financial support.

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7. Over half of all exports by small and medium-sized exporters from the U.S. are to Canada, Japan, and Mexico.

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8. Over 90 percent of the American companies that export are small and medium-sized enterprises.

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9. The dollar value of total world exports in 2004 was greater than the gross national product of every nation in the world except Japan.

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10. The magnitude of international trade and how it has grown are reflected in that one-fourth of everything grown or made in the world is now exported.

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11. The exports of most of the major exporting nations have increased at about the same rate as the world average although Japan, the E.U., and the developing nations as a whole surpassed the world average between 1992 and 2004.

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12. The dollar value of exports increased by 28 times from 1970 to 2005, but when inflation's effect is removed, the level of exports has only doubled.

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13. The developing countries as a whole have been accounting for a declining portion of the world merchandise exports since 1992.

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14. The proportion of manufacturing value added that is located in developed countries has been roughly stable for the past 20 years.

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15. South and East Asia's share of the world's manufacturing value added has nearly doubled since 1980.

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16. In 2004, the top 20 nations accounted for 75 percent of all exports and imports of merchandise worldwide.

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17. There are more emerging economies ranking among the leaders for both exports and imports of merchandise than is the case for exports and imports of services.

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18. More than half the exports from developing nations go to developed countries, and this proportion is increasing.

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19. Both developed nations and developing nations tend to trade more with developed nations.

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20. The extensive distribution system based on general trading companies (sogo shosha in Japanese) is one reason Japan sells more to developed nations than do most developed nations.

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21. Japanese companies have significantly more subsidiaries in developing nations than American companies do; these subsidiaries provide captive customers for their owners.

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22. Expanded regional trade agreements can substantially alter the level and proportion of trade flows within and across regions, and the share of world trade accounted for by members of regional trade agreements has increased from 37 to over 70 percent.

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23. International companies' choices of locations for their plants and other operations are influenced by the fact that members of trade groups are increasingly selling more to each other.

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24. An analysis of the major trading partners of the firm's home country and those of the nations where it has affiliates that export is of limited value to management.

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25. There are a number of advantages in focusing attention on a nation that is already a sizable purchaser of goods coming from the would-be exporter's country.

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26. China, Mexico, and Japan are the three largest trading partners of the U.S., in terms of the total volume of imports and exports.

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27. Foreign Trade Reports are no longer available from the U.S. Department of Commerce.

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28. Foreign investment can be divided into two components: promotion investment and direct investment.

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29. Portfolio investment is the purchase of sufficient stock in a firm to obtain significant management control.

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30. Direct investment is the purchase of stocks and bonds to obtain a return on the funds invested.

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31. The United States accounts for more outward foreign direct investment than any other nation.

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32. The proportion of the outstanding stock of foreign direct investment accounted for by the United States declined by two-thirds between 1985 and 2004.

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33. The proportion of the outstanding stock of foreign direct investment accounted for by Japan declined from 12 percent to 4.0 percent between 1990 and 2004.

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34. The proportion of worldwide outward foreign direct investment that comes from developing nations decreased from 14 percent in 1997 to over 11 percent in 2004.

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35. Industrialized nations invest primarily in one another just as they trade more with one another.

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36. From 1985 to 2005, the nation of Singapore received nearly half as much foreign investment as the entire African continent did during this time.

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37. The position of China and its territories as an increasingly larger destination for inward foreign direct investment from 1995 to 2004 represents a threat to other Asian economies.

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38. If a nation is continuing to receive appreciable amounts of foreign investment, its investment climate must be favorable.

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39. Historically, foreign direct investment has followed foreign trade, and one reason is that foreign trade is typically less costly and less risky than making a direct investment into foreign markets.

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40. Although the countries of sub-Saharan Africa have largely missed out on the trend of increasing international flows of foreign direct investment over the past two decades, the majority of African nations have introduced legislation liberalizing foreign direct investment.

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41. The new business environment of fewer government barriers to trade, increased competition from globalizing firms, and new production and communications technology is causing many international firms to disperse the activities of their production systems to locations close to available resources, and then integrate the entire production process either regionally or globally.

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42. The size, growth, and direction of U.S. foreign direct investment has been much more in the developing countries than in the developed countries.

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43. The level of Japanese outward foreign direct investment increased substantially between 2002 and 2004.

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44. Asian nations account for over one quarter of the total foreign direct investment in the United States.

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45. Firms from just eight nations, the UK, Japan, Netherlands, Germany, Canada, Luxembourg and France own over 85 percent of the total foreign direct investment in the United States.

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46. Since 1986, there has been more foreign investment in the United States than the level of American foreign direct investment abroad.

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47. Most of the foreign direct investment in the United States has been spent on establishing new companies.

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48. International firms enter foreign markets to increase profits and sales or protect markets from competition.

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49. One problem with using GNP per capita or GNI per capita in developing nations as a basis for comparing economies is that statistical systems in many developing nations are deficient and the reliability of the data is questionable.

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50. The growth in value of maquiladora output in Mexico, despite substantial reductions in the overall level of maquiladora employment, suggests that a shift is under way from the labor-intensive and limited technology “first-generation” activities and toward higher value-added work.

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51. Using the reverse maquila concept, a Mexican firm could up a firm on the American side to either (1) supply Mexico or (2) supply the United States.

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52. Many developing markets are growing at faster rates than is the U.S. market. 70 of 177 countries in the World Bank database had GDP per capita growth rates exceeding that of the U.S.

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53. The means for supplying foreign markets may be summarized in two activities: exporting to them or manufacturing in them.

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Multiple Choice Questions

54. One measure of the magnitude of international trade and how it has grown is _____________ of everything grown or made in the world is now exported.
A) 10%
B) 25%
C) 50%
D) 85%

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55. The dollar value of total world exports in 2004 was greater than the gross national product of every nation in the world except the
A) People's Republic of China
B) Germany
C) Japan
D) United States

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56. The quadrupling of world exports in 31 years demonstrates that _______________.
A) businesspeople must be prepared to meet increased competition
B) domestic business cannot compete with cheap imports
C) the opportunity to increase sales by exporting is a viable growth strategy
D) A, B, and C
E) A and C

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57. More than half of the exports from developing nations go to developed nations and
A) this proportion has been declining over the past 30 years.
B) over 70 percent of exports from developed economies also go to other industrialized nations.
C) Japan, the European Union, Australia and New Zealand each send a larger portion of its exports to developing nations than do other developed economies.
D) all of the above
E) A and B

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58. When considering where to export, advantages to managers of focusing on a nation that is already a sizable purchaser of goods coming from the home country include:
A) The cultures of the two countries should be relatively similar and compatible.
B) The climate for foreign direct investment in the importing nation is relatively favorable.
C) Export and import regulations are not insurmountable.
D) All of the above
E) A and B

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59. Many of the same Asian countries that are major exporters to the United States are also significant importers of American goods because:
A) their rising standards of living enable their people to afford more imported products.
B) they are purchasing large amounts of capital goods to further their industrial expansion.
C) they are importing raw materials and components that will be assembled and subsequently be exported, often to the U.S.
D) All of the above.
E) A and B

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60. The three largest markets for American exports in 2004 were:
A) Japan, the U.K., and China.
B) Japan, Mexico, and the U.K.
C) Canada, Mexico, and Japan.
D) Canada, Japan, and the U.K.
E) Japan, Mexico, and China

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61. The three nations that exported the largest amount to the United States in 2004 were:
A) Japan, Canada, and China.
B) China, Mexico, and the U.K.
C) Japan, China, and Saudi Arabia.
D) Canada, Japan, and Mexico.
E) Canada, Mexico, and China.

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62. The __________ maintains an Internet site with downloadable files of trade statistics.
A) The Department of Trade
B) The Department of Treasury
C) The Department of Commerce
D) The Department of Federal Statistics
E) A and D

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63. Foreign investment includes the following components:
A) portfolio investment.
B) joint venture investments.
C) direct investment
D) A and C.
E) A, B, and C.

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64. Firms from __________ had the largest total outstanding stock of direct overseas investment at the end of 2004.
A) Germany
B) the United States
C) the United Kingdom
D) Japan
E) France

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65. At the end of 2004, the value of the outstanding stock of foreign direct investment of all nations totaled more than:
A) 500 billion dollars
B) 1 trillion dollars
C) 2 trillion dollars
D) 6 trillion dollars
E) 10 trillion dollars

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66. Regarding the annual outflows of foreign direct investment,
A) the proportion that comes from developing nations doubled from 1997 to 2004.
B) the proportion that comes from the United States and Europe is nearly 30 percent.
C) much of the recent increase has been associated with mergers, acquisitions, and other international investments made by companies in industries facing increased competition and global consolidation.
D) nearly half went to China and its territories in 2004.
E) All of the above.

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67. American firms have invested more in __________ than in other nations.
A) Mexico.
B) Japan.
C) the European Union.
D) Canada.
E) China.

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68. Firms from which countries are the major investors in the United States?
A) Industrialized nations of Europe.
B) Oil-rich Middle East nations.
C) Japan.
D) Canada.

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69. In using GNP per capita as a basis for making comparisons of nations' economies
A) extreme care must be exercised to avoid drawing unwarranted conclusions.
B) realize statistical systems in many developing countries are deficient.
C) realize the reliability of the data provided is often questionable.
D) All of the above.
E) B and C.

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70. GNP/capita:
A) is an excellent tool for comparing the market potential of different nations.
B) takes into consideration the distribution of income.
C) is an arithmetic mean obtained by dividing GNP by the population.
D) all of the above.
E) A and B.

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71. In-bond plants (maquiladoras):
A) are allowed to import parts and processed materials without import duties.
B) are located on the border between Mexico and the U.S.
C) provide competitive production sites due to lower cost labor.
D) All of the above.
E) None of the above.

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72. Increasing wage rates in Mexico have affected maquilas in the following ways:
A) encouraged Mexican firms to establish U. S. plants to supply the Mexican market.
B) encouraged higher value work in the Mexican maquila plants
C) encouraged American plants in Mexico to supply the Mexican market.
D) A and B.
E) A, B, and C.

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73. These are reasons to enter foreign markets:
A) to increase profits, protect foreign markets, guarantee market share
B) to protect foreign markets, maintain access to raw materials, and establish geographic diversification
C) to increase profits
D) B and C

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74. When foreign exchange is scarce, governments usually give preference to the importation of:
A) B and C.
B) capital goods.
C) raw materials.
D) consumer goods.
E) all of the above.

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75. Methods for supplying foreign markets may be categorized in just two activities:
A) exporting to a foreign market and manufacturing in it.
B) exporting goods to a foreign market and exporting services to it.
C) manufacturing in a foreign market and licensing technology.
D) establishing joint ventures and wholly-owned production facilities.

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76. According to the text, there are ______________ dimensions along which management can globalize.
A) at least seven
B) no more than two
C) over twelve
D) A and C

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