International Business Environment Set 1

QN1. Which one of the following is not an assumption of the Ricardo Model :

i. Constant returns to scale

ii. Factors of production can be transferred easily one sector to another

iii. There is perfect competition in the market

iv. Technological innovation is a unique feature of the market structure

Answer

Answer: iii. There is perfect competition in the market

QN2. Which of the following is not a form of Non Tariff Barrier

i. Subsidies

ii. Local Content Requirement

iii. Ad valorem Duties

iv. Technical Standards

Answer

Answer: iii. Ad valorem Duties

QN3. For a US trader a direct quote will be :

i. US$ 1 = 56.7 Yen

ii. GBP 1 = 34.5 Yen

iii. GBP 1 = 35.6 Euro

iv. None of the above

Answer

Answer: i. US$ 1 = 56.7 Yen

QN4. Which of the following is an example of depreciation of Indian Rupee

i. Now US$ 1 = 45 INR after 3 months US$ 1 = 50 INR

ii. Now US$ 1 = 50 INR after 3 months US$ 1 = 45 INR

iii. Both i and ii above

iv. None of the above

Answer

Answer: i. Now US$ 1 = 45 INR after 3 months US$ 1 = 50 INR

QN5. A currency is said to be at a premium when :

i. Spot rate is higher then the forward rate

ii. Forward rate is higher then the spot rate

iii. Forward rate is equal to the spot rate

iv. None of the above

Answer

Answer: iii. Forward rate is equal to the spot rate

QN6. Which of the following statement describes the Heckscher-Ohlin Theory

i. Countries should export goods that are made of factors of production that are available in abundance in the economy

ii. Countries should produce and export those goods in which they have absolute advantage

iii. Countries should produce and export those goods in which they have comparative advantage

iv. Increase in the endowment of one of the factors will reduce the production of goods that intensively use the other factor

Answer

Answer: i. Countries should export goods that are made of factors of production that are available in abundance in the economy

QN7. “If US is capital rich and innovation increases the productivity of capital, then labour intensive industries in US will get hurt” is

i. Stolper-Samuelson Theorem

ii. Leontief Paradox

iii. Rybczynski Theorem

iv. Heckscher-Ohlin Theory

Answer

Answer: iv. Heckscher-Ohlin Theory

QN8. Which of the following is not part of Current Account transactions of a country?

i. Merchandise trade

ii. Unilateral Transfers

iii. Receipts from FDI abroad

iv. Change in forex reserve of a country

Answer

Answer: iii. Receipts from FDI abroad

QN9. In an economy which out of the following is not the reasons for internal debt i.e excess of government expenses over revenue, are :

i. Poorly managed tax system

ii. Huge expenses on defense and welfare program

iii. State owned enterprises have huge losses

iv. Impressive economic growth

Answer

Answer: iv. Impressive economic growth

QN10. Which of the following is not an underlying principle of GATT?

i. Trade concessions by member countries will be reciprocated

ii. Countries should grant preferential treatment to other member countries

iii. Trade dispute between member countries to be settled by dispute settlement mechanism of GATT

iv. Policies governing external trade should be transparent

Answer

Answer: iii. Trade dispute between member countries to be settled by dispute settlement mechanism of GATT

QN11. Which of the following is not an objective of NAFTA:

i. Access to financial services

ii. To investigate environment and labour abuses

iii. No change in tariff

iv. Protection for investment

Answer

Answer: iii. No change in tariff

QN12. Which of the following is not a type of regional economic integration?

i. Free Trade Area

ii. Customs Union

iii. Common Market

iv. GATT

Answer

Answer: ii. Customs Union

QN13. EU is an example of which type of regional economic integration?

i. Economic Integration

ii. Customs Union

iii. Free Trade Agreement

iv. Preferential Trade Agreement

Answer

Answer: iv. Preferential Trade Agreement

QN14. Which of the following is an example of regional trade agreement among Asian Countries?

i. SAPTA

ii. CARICOM

iii. EEC

iv. CACM

Answer

Answer: i. SAPTA

QN15. Which of the following is not founder member country of ASEAN?

i. Cambodia

ii. Singapore

iii. India

iv. Vietnam

Answer

Answer: iii. India

QN16. GATT was formed in which year and by how many countries?

i. 1920, 15 countries

ii. 1947, 23 countries

iii. 1947, 15 countries

iv. 1935, 23 countries

Answer

Answer: ii. 1947, 23 countries

QN17. Which of the following is not an example of Quantitative Restriction on trade?

i. Quotas

ii. Voluntary Export Restraint

iii. Embargo

iv. Subsidies

Answer

Answer: iv. Subsidies

QN18. India is an example of which type of Economic System

i. Mixed Economy

ii. Command Economy

iii. Market Economy

iv. Centrally Planned Economy

Answer

Answer: i. Mixed Economy

QN19. In a command economy or centrally planned economy

i. Government owns and controls all resources

ii. Society owns and controls all resources

iii. Community owns and controls all resources

iv. Private entities owns and controls all resources

Answer

Answer: i. Government owns and controls all resources

QN20. Which of the following economic indicator is used to rank countries in terms of their individual wealth by World Bank?

i. GDP per capita

ii. GNI per capita

iii. PPP

iv. GNI

Answer

Answer: ii. GNI per capita

QN21. Dumping which is a type of non tariff barriers means

i. Selling products at less than fair value

ii. Selling goods that are mass produced in an economy

iii. Selling goods utilizing old technology

iv. Selling goods of inferior quality

Answer

Answer: ii. Selling goods that are mass produced in an economy

QN22. Which of the following pair is wrongly matched?

i. Theory of Absolute Advantage – Adam Smith

ii. Theory of Comparative Advantage – David Ricardo

iii. Heckscher-Ohlin Theory – Wassily Leontif

iv. Product Life Cycle Theory – Raymond Vernon

Answer

Answer: iii. Heckscher-Ohlin Theory – Wassily Leontif

QN23. According to Porter, which of the following factors will not help in determining the Global Competitive Advantage of the company?

i. Monopoly market conditions i.e. Absence of Rivals

ii. Firm Strategy

iii. Presence of related and supporting industry

iv. Factor conditions

Answer

Answer: i. Monopoly market conditions i.e. Absence of Rivals

QN24. Observation that “US exports were less capital intensive the US imports” which is the contradiction to the HO model is known as

i. Leontif Paradox

ii. Stopler-Samuelson Theorem

iii. Rybczynski Theorem

iv. New Product Life Cycle Theorem

Answer

Answer: i. Leontif Paradox

QN25. In which type of trade agreement no duties are charged on imports from member countries

i. Preferential Trade Agreement

ii. Free Trade Agreement

iii. Custom Union

iv. None of the above

Answer

Answer: ii. Free Trade Agreement

QN26. GATT stands for

i. General Agreement on Trade and Tariffs

ii. General Agreement on Tariffs and Trade

iii. General Arrangement on Tariffs and Trade

iv. General Arrangement on Trade and Tariffs

Answer

Answer: ii. General Agreement on Tariffs and Trade

QN27. Which of the following was not an achievement of the Uruguay Round of negotiations?

i. Agreement on services

ii. Protection of Intellectual property rights

iii. 10 year phase out of MFA

iv. Agreement on Trade in Agriculture

Answer

Answer: iii. 10 year phase out of MFA

QN28. Which of the following countries is not a member of ASEAN?

i. Thailand

ii. China

iii. Vietnam

iv. Singapore

Answer

Answer: ii. China

QN29. Glasnost and Perestroika were introduced by which Soviet Leader?

i. Mikhail Gorbachev

ii. Leonid Brezhnev

iii. Yuri Andropov

iv. Konstantin Chernenko

Answer

Answer: i. Mikhail Gorbachev

QN30. Which of the following country was first to disintegrate from Soviet Republic?

i. Ukraine

ii. Lithuania

iii. Turkmenistan

iv. Tajikistan

Answer

Answer: ii. Lithuania

QN31. Which if the following country was not the member of the European Coal and Steel Community (ECSC)?

i. Belgium

ii. France

iii. Spain

iv. Germany

Answer

Answer: iii. Spain

QN32. Neo-mercantilist theory is different from the Mercantilist theory as neo-mercantilist theory proposes that

i. A country should have favourable balance of trade

ii. Countries should trade with each other for social and political objectives

iii. Country should promote import and restrict export

iv. Country should export those products which they can produce more efficiently

Answer

Answer: iv. Country should export those products which they can produce more efficiently

QN33. WTO was formed during which round of negotiations ?

i. Uruguay Round

ii. Doha Round

iii. Singapore Round

iv. Tokyo Round

Answer

Answer: i. Uruguay Round

QN34. Which of the following is an example of cross exchange rate?

i. USD 1 = 50.6 Euro

ii. USD 1 = 45.7 GBP

iii. Yen 1 = 34.5 Euro

iv. USD 1 = 45.9 INR

Answer

Answer: i. USD 1 = 50.6 Euro

QN35. How inflation and Exchange rate are related to each other?

i. Higher inflation leads to currency devaluations

ii. Higher inflation leads to currency appreciation

iii. High inflation leads to currency stability

iv. There is no relation between inflation and exchange rate

Answer

Answer: i. Higher inflation leads to currency devaluations

QN36. External Debt is measured as

i. Total External Debt of a country

ii. Debt as percentage of GDP

iii. Total of Fiscal deficit and External borrowings

iv. Both i and ii above

Answer

Answer: iii. Total of Fiscal deficit and External borrowings

QN37. What does transition to market economy means?

i. Liberalizing economic activity

ii. Control of economy by government

iii. Imposing trade restrictions

iv. All of the above

Answer

Answer: iv. All of the above

QN38. Which of the following countries is not a member of MERCOSUR?

i. Brazil

ii. Argentina

iii. Paraguay

iv. Mexico

Answer

Answer: iv. Mexico

QN39. What is a convertible currency?

i. Currency that can be freely traded with other currencies

ii. Currency that can be traded only with hard currencies

iii. Currencies of the Asian Countries

iv. Currencies of the developed countries

Answer

Answer: i. Currency that can be freely traded with other currencies

QN40. Currency Speculation is done to

i. Cover risk and earn profit

ii. Cover risk

iii. Maintain foreign currency account to earn interest

iv. None of the above

Answer

Answer: i. Cover risk and earn profit