MIB Master of International Business: Global Business Environment 2

Question 1

Which theory explains why countries export goods in industries where they have a large domestic market, even without a natural resource advantage?

Accepted Answer

Linder's demand similarity theory

Answer

Linder's theory holds that countries trade most intensively in products for which they share similar domestic demand structures.

Question 2

A multinational corporation shifts profits to a low-tax subsidiary by pricing intra-company transactions above market rates. This practice is called:

Accepted Answer

Transfer pricing manipulation

Answer

Transfer pricing manipulation involves setting artificial prices on intercompany transactions to shift taxable income to lower-tax jurisdictions.

Question 3

The OECD's Base Erosion and Profit Shifting (BEPS) project primarily targets:

Accepted Answer

Tax avoidance strategies that exploit gaps in international tax rules

Answer

BEPS addresses strategies used by multinationals to shift profits to low- or no-tax locations, eroding the tax base of higher-tax countries.

Question 4

Under a floating exchange rate regime, a country running a persistent current account deficit will theoretically experience:

Accepted Answer

Currency depreciation, which helps correct the deficit

Answer

A current account deficit means more foreign currency is demanded than supplied, pushing the currency down and making exports cheaper and imports dearer.

Question 5

Which WTO principle requires a member to extend the same trade advantages given to one trading partner to all other WTO members?

Accepted Answer

Most-Favored-Nation (MFN)

Answer

The MFN principle prohibits discrimination among WTO members, requiring equal treatment for all in tariff and trade policy.

MIB - Master of International Business Practice Test

MIB - Master of International Business Practice Test

MIB Master of International Business: Global Business Environment 2