QN1: International trade is the exchange of goods and services within domestic borders.
Answer
Answer: False. It is the exchange of goods and services across national boundaries.
QN2: Exports create high-wage employment. This can be seen by the study conducted by the USTR, which found that workers in export-related sectors earn 17 percent more than the average worker in the United States.
QN3: A recent study on wages and trade found a negative correlation between export intensity and wages.
Answer
Answer: False. A positive correlation was found.
QN4: Trade in services constitutes 25 percent of overall trade in 2004.
QN5: Export-related wages are higher in the service sector than in manufacturing.
Answer
Answer: False. They are higher in manufacturing.
QN6: Import penetration is associated with lower demand elasticity, which increases workers’ bargaining power.
Answer
Answer: False. Import penetration is associated with greater demand elasticity, which reduces workers’ bargaining power.
QN7: Key factors that have contributed to the increase in Singapore’s exports include the country’s open trade, investment, and economic policies.
QN8: Large countries tend to be more dependent on international trade than smaller countries.
Answer
Answer: False. Smaller countries are more dependent since they do not have a diversified economy.
QN9: In 2004, developing countries accounted for about half of the world’s top twenty-five exporters and importers.
Answer
Answer: False. Developing countries accounted for more than one-third of the world’s top twenty-five exporters and importers.
QN10: Global imbalances may be reduced by a reduction in excess savings.
QN11: The GATT in theory was an organization in which participating nations were called “contracting parties.”
Answer
Answer: False. GATT was not an organization.
QN12: The most current round of WTO negotiations was the Uruguay Round, which took place in Qatar.
Answer
Answer: False. The Doha Round is the most recent round that took place in Qatar.
QN13: According to NAFTA, Mexico is allowed to place temporary capital limits for banks, securities firms, and insurance companies during a transition period.
QN14: NAFTA requires members to provide ninety days notice before adapting new standards and allowing for comments before implementation.
Answer
Answer: False. NAFTA requires thirty days notice.
QN15: A common market includes elements of a customs union and allows for the free movement of labor and capital among member nations.
QN16: One of the objectives of the European Union is to abolish restrictions on the free movement of all factors of production, including labor, services, and capital.
QN17: NAFTA provides for a common external tariff.
Answer
Answer: False. It does not provide for a common external tariff.
QN18: The European Union does not provide economic assistance to member states. However, it allows for economic/monetary union.
Answer
Answer: False. It does provide for economic assistance.
QN19: The GATT/WTO has used the principle of nondiscrimination to reduce trade barriers.
QN20: All trade agreements seek free trade and economic cooperation.
QN21: In a partnership, “persons” is not to be interpreted to include corporations, partnerships, or other associations.
Answer
Answer: False. “Persons” is interpreted to include corporations, partnerships, and other associations.
QN22: Co-ownership of a business in a partnership is determined by share of business profits and management responsibility.
QN23: A corporation is not separate from its owners and is created pursuant to state laws in the place the business is incorporated.
Answer
Answer: False. The corporation is a separate entity.
QN24: The United States, the Netherlands, and Germany are some of the countries that do not impose taxes on the basis of worldwide income.
Answer
Answer: False. They do impose taxes on worldwide income.
QN25: A controlled foreign corporation (CFC) is a foreign corporation in which U.S. shareholders own less than 50 percent of its voting stock or more than 50 percent of the value of its outstanding stock on any of the foreign corporation’s tax year.
Answer
Answer: False. Shareholders must own more than 50 percent of its voting stock.
QN26: In general, U.S. companies that export their goods will incur no tax liability in importing countries if their agents overseas do not have authority to conclude sales contracts on behalf of the U.S. exporter.
QN27: A foreign corporation marketing products in the United States through independent agents incurs no tax liability in the United States.
QN28: If a parent company sells its output to a foreign marketing subsidiary at a higher price, it moves overall gains to the subsidiary.
Answer
Answer: False. Gains are moved to the parent company.
QN29: Standard business deductions include general and administrative expenses, personal and business expenses, and entertainment, travel, and other business-related expenses.
QN30: Permanent establishment is meant to describe a fixed place of business through which the business of an enterprise is only partially discharged.
Answer
Answer: False. Permanent establishment is meant to describe a fixed place of business through which the business of an enterprise is wholly or partially discharged.
QN31: Factors that firms must consider before exporting their products overseas include the success of the product in the domestic market, participation in overseas trade shows, and advertising and market data.
QN32: The reactive approach involves the selection of a product or service based on overall market demand.
Answer
Answer: False. The systematic approach involves this.
QN33: International market assessment is a form of environment scanning that permits a firm to select a large number of desirable markets on the basis of broad variables.
Answer
Answer: False. International market assessment is a form of environment scanning that permits a firm to select a small number of desirable markets on the basis of broad variables.
QN34: Secondary screening involves financial, but not economical conditions.
Answer
Answer: False. Secondary screening involves both financial and economical conditions.
QN35: Major programs offered by the Department of Commerce include trade development, market access and compliance, and the Gold Key Service.
QN36: The Gold Key Service provides services to non–U.S. and U.S. exporters by prescreening potential suppliers, professional associations, and so on.
Answer
Answer: False. The service provides services only to U.S. exporters.
QN37: Commercial banks provide market research and promotion, financing exports, collections, credit information, and assistance.
Answer
Answer: False. Market research and promotion is a characteristic of trading companies.
QN38: Foreign media, commercial publications, and personal selling are ways that exporters can advertise their product or service overseas.
QN39: Important factors to consider in selecting the export product include shifting spending patterns and emphasis on niche marketing.
QN40: Trade missions are another import sales promotion tool.
Answer
Answer: False. They are only an export sales promotion tool.
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