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Global Global Marketing Marketing Management, Management, 8e(Keegan) 8e(Keegan) Chapter 2 The Global Economic Environment

1) The macro dimensions of the environment aare re economic, social and cultural, politica legal, and technological. Answer: TRUE AACSB: Analytical thinking Difficulty: Easy 2) Economic growth remains concentrated at the high-income countries. Answer: FALSE AACSB: Analytical thinking Difficulty: Easy 3) The more developed a country is, the scarcer the availability of economic data. Answer: FALSE AACSB: Analytical thinking Difficulty: Easy 4) 4) Technology Technology as as aa factor factor has has contributed contributed to to the the flattening flattening of of the the world world economy. economy. Answer: TRUE AACSB: Analytical thinking Difficulty: Easy 5) 5) Countries Countries in in emerging emerging markets markets have have sustained sustained high high rates rates of of growth growth by by taking taking advant advan high labor costs. Answer: FALSE AACSB: Analytical thinking Difficulty: Easy 6) Global companies entering new markets will need to adapt their offerings, distributio systems, and operations to local demand and custom. Answer: TRUE AACSB: Analytical thinking Difficulty: Easy 7) Most countries of the world have a mixed system of allocation. Answer: TRUE AACSB A l i l hi ki

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9) 9) According According to to the the Heritage Heritage Foundation, Foundation, the the country country with with the the highest highest degree degree of of econom econo freedom is the United States. Answer: FALSE AACSB: Analytical thinking Difficulty: Easy 10) Low-income countries are typically referred to as indu industrialized strialized nations. Answer: FALSE AACSB: Analytical thinking Difficulty: Easy 11) 11) High-income High-income countries countries are are referred referred to to as as emerging emerging markets. markets. Answer: FALSE AACSB: Analytical thinking Difficulty: Easy 12) Low-income countries typically have low bbirth irth rates and high literacy rates. Answer: FALSE AACSB: Analytical thinking Difficulty: Easy 13) 13) Another Another name name for for lower-middle lower-middle income income coun countries tries is industrializing countries. Answer: FALSE AACSB: Analytical thinking Difficulty: Easy 14) 14) The The nations nations of of the the G20 G20 are are among among the the most most powerful powerful nations nations of of the the postindustrial postindustrial ss Answer: TRUE AACSB: Analytical thinking Difficulty: Easy 15) 15) A A market market can can be be defined defined as as aa group group of of people people willing willing and and able able to to buy buy aa particular particular pp service. Answer: TRUE AACSB: Analytical thinking Difficulty: Easy 16) Location is the single most valuable economic indicator of potential for industrial p A FALSE

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18) Purchasing Purchasing power power differences differences can can account account for for differential differential in demand demand of products products an an services, and also provide an indication on differences in costs. Answer: TRUE AACSB: Analytical thinking Difficulty: Easy 19) 19) Purchasing Purchasing power power parity parity measures measures an aneconomy's economy's output output in in terms terms of of demand demand and and su su Answer: FALSE AACSB: Analytical thinking Difficulty: Easy 20) The current account is a record of all long-term direct investment, portfolio investm other short- and long-term capital flows. Answer: FALSE AACSB: Analytical thinking Difficulty: Easy 21) In general, a countr countryy accumulates reserves when the net of its current and capital ac a transactions shows a deficit. Answer: FALSE AACSB: Analytical thinking Difficulty: Easy 22) 22) Devaluation Devaluation means means that that more more of of the the home-country's home-country's currency currency is is now now needed needed to to buy buy amount of a foreign currency. Answer: TRUE AACSB: Analytical thinking Difficulty: Moderate 23) 23) In In aa fixed fixed exchange-rate exchange-rate system, system, the the currency currency value value is is determined determined by by demand demand and and ss Answer: FALSE AACSB: Analytical thinking Difficulty: Easy 24) The United States is an example of a country that follows a fixed exchange-rate sys sy Answer: FALSE AACSB: Analytical thinking Diffi l E

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26) 26) The The Euro Euro is is aa common common currency currency adopted adopted by bythe the members members of of the the European European Union. Union. Answer: TRUE AACSB: Analytical thinking Difficulty: Easy 27) The member states of the Common Commonwealth wealth of Independent Independent States (CIS) (CIS) have have signed agreements issues of integration and cooperation with respect to economics and foreign addressing policy. Answer: TRUE AACSB: Analytical thinking Difficulty: Easy 28) A common market goes be beyond yond the removal removal of of internal barriers to to trade and and the establishment of common external barriers to the important next stage of eliminating th to the flow of factors (labor and capital) within the market. Answer: TRUE AACSB: Analytical thinking Difficulty: Easy 29) Member states of the North American Free Trade Agreement (NAFTA) are allowe separate bilateral treaties with nonmember states. Answer: TRUE AACSB: Analytical thinking Difficulty: Easy 30) The ASEAN Free Trade Area, or AFTA, was created in 11992 992 with the aim of prom region's competitive advantage as a single production area with the elimination of tariff nontariff barriers among the member countries. Answer: TRUE AACSB: Analytical thinking Difficulty: Easy 31) 31) Which Which of of the the following following statements statements is is true true about about world world economy? economy? A) Countries in emerging markets have sustained low rates of growth. B) B) Global Global competitors competitors are are deprived deprived of of new new oppo opportunities. rtunities. C) The emergence of global markets has displaced local ones. D) The integration between all world regions has steadily ddecreased. ecreased. Answer: C AACSB A l i l hi ki

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32) Which of the following statements is true about the trends in world economy? A) Global economic activity will shift from the East to the West. B) B) The The demand demand for for natural natural resources resources will will continue continue to to grow. grow. C) Shifts in consumer segments will not affect the consumer marketplace. D) D) An An aging aging worldwide worldwide population population will will demand demand decreasing decreasing levels levels of of productivity. productivity. Answer: B AACSB: Analytical thinking Difficulty: Easy 33) Which of the following is characteristic of a pure market allocation system? A) A) The The consumers consumers decide decide what what goods goods will will be be produced produced and and by by whom. whom. B) The state determines the goods that con consumers sumers should use. C) It has limited economic integration with the rest of the world regions. D) It fails to utilize the market mix elements when demand exceeds supply. Answer: A AACSB: Analytical thinking Difficulty: Easy 34) Which of the following is characteristic of a co command mmand allocation system? A) The government's role is to ensure ensure the protection of consumer rights. B) Product distribution is handled by a large number of intermediaries. C) C) The The state state makes makes decisions decisions on on what what consumers consumers should should purchase. purchase. D) Consumers allocate resources to the system. Answer: C AACSB: Analytical thinking Difficulty: Easy 35) Which of the following is used to indicate the relative wealth of a coun country's try's citizenr A) Gross National Product B) Gross Output C) Gross Domestic Product D) Gross Value Added Answer: A Difficulty: Easy 36) 36) With With regard regard to to Gross Gross National National Product Product per per cap capita, ita, which of the following categorie countries is considered to be developed? A) lower-middle income

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37) Which of the following is characteristic of low-income countries? A) sustained economic growth B) low engagement in agriculture C) high degree of urbanization D) heavy reliance on foreign aid Answer: D AACSB: Analytical thinking Difficulty: Easy 38) 38) Which Which of of the the following following categories categories of of countries countries is is referred referred to to as as a postindustrial cou A) low-income B) upper-middle income C) lower-middle income D) high-income Answer: D Difficulty: Easy 39) Which of the following is the most valuable economic variable used to chart strateg for global market expansion of commercial products? A) regulations B) competitors C) income D) location Answer: C Difficulty: Easy 40) 40) ________ ________ accounts accounts for for the the largest largest share share of of output output in in less less developed developed countries. countries. A) Education B) Agriculture C) Consumer goods D) Heavy industries Answer: B Difficulty: Easy 41) 41) ________ ________ provides provides the the best best comparison comparison of of the standards of of living in the countries world. A) Purchasing power parity B) Exchange rate

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42) 42) Which Which of of the the following following is is the the primary primary output output of of the the World World Bank's Bank's International International Co Co Program? A) purchasing power parities B) currency fluctuations C) market demand and supply D) production costs Answer: A Easy Difficulty: 43) 43) Which Which of of the the following following can can be be perceived perceived from from measuring measuring actual actual individual individual consum consum across global markets? A) Developed countries are likely to bene benefit fit more from full integration than developing countries. B) B) Purchasing Purchasing power power differences differences do do not not acco account unt for for differences differences in in demand demand of of products products services. C) C) The The living living standards standards of of high-income high-income countries countries differ differ from from low-income low-income ccountries. ountries. D) A vast majority of the world's income is conce concentrated ntrated in the lower-middle or upperincome countries. Answer: C AACSB: Analytical thinking Difficulty: Moderate 44) Which of the following is the most important variable considered for identifying opportunities in the global economy to sell low-priced products? A) middle-class income B) location of population C) demand in products D) cost of products Answer: B AACSB: Analytical thinking Difficulty: Easy 45) 45) Which Which of of the the following following portrays portrays all all the the econo economic mic transactions of a country with the the world? A) balance of payments B) International Comparison Comparison Program C) purchasing power parity D) Gross National Product per capita

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46) Which of the following statements is true of global trade patterns? A) The annual rate of out output put is less than the total merchandise trade. B) B) In In most most countries, countries, the the share share of of trade trade as as aa percentage percentage of of the the national national economy economy has has red re C) C) Import Import and and export export growth growth has has outpaced outpaced the the rate rate of of increase increase in in GNP. GNP. D) D) The The share share of of agriculture agriculture in in exports exports has has increased increased over over the the past past decade. decade. Answer: C AACSB: Analytical Difficulty: Moderatethinking 47) 47) ________ ________ refers refers to to the the price price of of one one currency currency in in terms terms of of another. another. A) Tariff B) Exchange rate C) Duty D) National income Answer: B Difficulty: Easy 48) Which of the following is a characteristic of co countries untries in a free trade area? A) abolition of internal tariffs and quotas B) establishment of common external barriers C) removal of restriction on factor movements D) harmonization of economic, social, and regulatory policies Answer: A AACSB: Analytical thinking Difficulty: Moderate 49) Which of the following eliminates trade barriers to allow the harmonization of econ social, and regulatory policies? A) a customs union B) a common market C) a free trade area D) an economic union Answer: D Difficulty: Easy 50) 50) Which Which of of the the following following is is aa trade trade block block created created between between Canada, Canada, Mexico, Mexico, and and the the U U States? A) NAFTA

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51) 51) Which Which of of the the following following is is an an example example of of aa customs customs union? union? A) CSME B) European Economic Area C) NAFTA D) Mercosur Answer: D AACSB: Analytical thinking Difficulty: Easy 52) What are the characteristics of a low-income country? Answer: Low-income countries sshare hare the following characteristics: 1. Limited industrialization and a high percentage of the population engaged in agricult subsistence farming 2. High birth rates and low literacy rates, especially amon amongg women and girls 3. Heavy reliance on foreign aid 4. High levels of poverty 5. Inequality of income distribution 6. Political instability and unrest due at least in part to disenfranchised social groups AACSB: Analytical thinking Difficulty: Easy 53) 53) What What are are exchange exchange rates? rates? How How do do they they affect affect the the global global economy? economy? Answer: Exchange rates are the price of one currency in terms of another. IIff exchange change, so do the p prices rices of of exports exports and and imports. imports. Countries Countries whose whose exchange exchange rates are de will find their exports becoming more price competitive aand nd their imports relatively mo expensive. If a seller of products or services expec expects ts payment for exports in any denom other other than than their their home home currency, currency, the the total total home-country home-country receipts receipts will will change change depending depending exchange rate at the time payment is made. Because exchange rates can give a price adv producers, producers, governments governments seek seek to to manage manage exchange exchange rates. rates. This This isis done doneby by using using reserves reserves sell sell foreign foreign currencies. currencies. If If reserves reserves are are not not used, used, market market supply supply and and demand will decide of of the the currency. currency. Countries Countries can can choose choose to to devalue their currency purposefully to stimula economy's exports and limit imports. AACSB: Analytical thinking Difficulty: Moderate...