IDENTIFY THE BEST (letter) ANSWER. THEN EXPLAIN (IN THE SPACE PROVIDED) WHY
Mercantilism
a) Is a zero-sum game
b) Explains why Adam Smith’s treatise, The Dearth of Nations, is not valid
c) Is the same as neo-mercantilism
d) Is the same as the New Trade Theory
1. Which scenario below makes the most sense?
a) British pounds are more valuable than $US dollars.
b) $US are more valuable than British pounds
c) In London, you exchange your $US dollars for British pounds. The current exchange rate is 1.5 $US dollars for 1 British pound. When you go to buy something at a store in London the clerk says you can pay in pounds or dollars. The price for the product is 10 British pounds. Paying is British pounds is the cheapest way to go!
d) From the answer “c” it’s obvious that the price is the same if you do not consider commission and fees associated with the exchange process.
2. With regard to trade theories: Theories should be tested to see if they can predict trade outcomes.
a) Yes, this makes sense.
b) No this does not makes sense.
c) Theories cannot be tested.
d) Theories are facts.
3. The story about the Doctor and the Secretary was about
a) The Da Vinci theory of trade.
b) Absolute advantage.
c) National Competitive Advantage.
d) None of the above.
4. In question #2 above, we assumed that a retailer in London would accept either pounds are dollars. But it fact,
a) This would be a very unusual situation since only British pounds are legal tender in England.
b) This happens all the time because $US dollars are worth more.
c) Both answers “a” and “b” are true.
d) The assumption is generally false.
5. In preparation for a trip to Japan, you exchange $1000 for 104,000 yen while still in the United States. Then, in August you go to Japan and spend 52,000 yen before coming back home. When you land in New York, you exchange your remaining 52,000 yen for dollars. But the exchange rate has changed. The Japanese yen has weakened by 10%. (Do not take into account exchange fees or commission associated with the transactions.)
a) You are excited because you have “made money.”?
b) You are not excited?
c) You should not exchange your yen now because the yen will further depreciate.
d) Exchanging your yen for euros makes more since because the dollar has strengthened against the yen.
6. The law of one price states than in competitive markets identical products sold in different countries must sell for the same price when their prices are expressed in terms of the same currency. But this law is conditional because . . .
a) It assumes no transportation costs.
b) It assumes no barriers of trade, such as tariffs.
c) Supply and demand may differ among countries. This impacts the law of one price, too.
d) All three (a, b, and c) are true.
7. The best and most common “risk” by businesses in foreign markets is
a) Political risk
b) Economic and legal risk
c) All or any of the above can be generally common
d) There is no risk in international business
8. Describe and illustrate with an appropriate table a scenario in which you would express annual profit goals for the year 2016 in your home currency to country managers in Japan, Germany, Australia, Taiwan and India. Choose a beginning exchange rate(s) and decide on an adjusted final exchange rate. Assume that their currencies will weaken by 10%.
You should show how local profit numbers (i.e., in local currencies) will vary depending upon the exchange rates/changes for each country. It’s okay if you use slightly different exchange rates than the other students in class.
9. You are a global project manager and need to communicate with company employees all over the world. In particular, you need to communicate with managers in Taipei, Taiwan, Brussels, Belgium and Kyoto, Japan. Determine what time of day (EST GMT time) you will need to communicate with each manager at 9 a.m. their time. What time (EST GMT time and local time a.m. /p.m.) will this be for you?