MIB Master of International Business 4 — Questions and Answers
Question 1: Which institution is primarily responsible for providing balance-of-payments support and macroeconomic stabilization loans to member countries?
- World Bank
- WTO
- International Monetary Fund (Correct answer)
- OECD
Correct answer: International Monetary Fund
The IMF provides short-term financial assistance to countries with balance-of-payments crises and helps stabilize global monetary systems, distinct from the World Bank's development focus.
Question 2: A company that manufactures in China using Japanese components and sells finished goods in Germany is an example of:
- Horizontal FDI
- Global value chain participation (Correct answer)
- Greenfield joint venture
- Reverse innovation
Correct answer: Global value chain participation
Global value chains (GVCs) involve geographically dispersed production stages across multiple countries, with each country contributing based on its comparative advantage.
Question 3: The Eclectic (OLI) Paradigm by Dunning suggests that FDI occurs when a firm has Ownership advantages, Location advantages, AND:
- Labor cost advantages
- Internalization advantages (Correct answer)
- Lobbying advantages
- Licensing preferences
Correct answer: Internalization advantages
The OLI (Ownership, Location, Internalization) framework holds that firms invest abroad when it is more beneficial to exploit their advantages internally (via FDI) rather than externally (via licensing or exports).
Question 4: Which trade bloc requires member countries to adopt a common external tariff against non-members?
- Free Trade Area
- Customs Union (Correct answer)
- Common Market
- Preferential Trade Area
Correct answer: Customs Union
A Customs Union eliminates internal tariffs among members AND establishes a unified tariff wall against outside countries, unlike a free trade area where members set their own external tariffs.
Question 5: In cross-cultural management, 'high-context' cultures rely heavily on:
- Explicit written contracts and detailed verbal instructions
- Implicit communication, nonverbal cues, and shared context (Correct answer)
- Individualistic decision-making processes
- Short-term performance metrics
Correct answer: Implicit communication, nonverbal cues, and shared context
In high-context cultures (e.g., Japan, China, Arab countries), much of communication is implicit — meaning is conveyed through context, relationships, and nonverbal signals rather than explicit words.
Question 6: A 'currency crisis' typically occurs when:
- A central bank accumulates excessive foreign reserves
- Speculative attacks force a government to devalue or abandon its exchange rate peg (Correct answer)
- A country runs a persistent current account surplus
- Interest rates in a country rise sharply above global averages
Correct answer: Speculative attacks force a government to devalue or abandon its exchange rate peg
Currency crises (e.g., the 1997 Asian Financial Crisis) happen when speculative capital outflows overwhelm a central bank's reserves, forcing devaluation or peg abandonment.
Question 7: Which risk management instrument allows an MNC to lock in a future exchange rate for a foreign currency transaction?
- Currency swap
- Forward contract (Correct answer)
- Currency option
- Spot transaction
Correct answer: Forward contract
A forward contract is a binding agreement to buy or sell currency at a predetermined rate on a specific future date, eliminating exchange rate uncertainty for the agreed amount.
MIB Master of International Business 4
Which institution is primarily responsible for providing balance-of-payments support and macroeconomic stabilization loans to member countries?