MIB Master of International Business: Global Business Environment 4 — Questions and Answers
Question 1: Which international monetary system replaced the gold standard after World War II and pegged currencies to the US dollar?
- The Plaza Accord system
- The Bretton Woods system (Correct answer)
- The European Monetary System
- The Jamaica Agreement system
Correct answer: The Bretton Woods system
The Bretton Woods system (1944–1971) fixed currencies to the dollar, which was itself convertible to gold at $35 per ounce.
Question 2: A country imposes a voluntary export restraint (VER). From a trade policy perspective, VERs are typically:
- Formal tariffs agreed upon in multilateral WTO negotiations
- Agreements where the exporting country limits its own shipments under pressure (Correct answer)
- Quotas imposed unilaterally by the importing country
- Subsidies to domestic exporters disguised as price controls
Correct answer: Agreements where the exporting country limits its own shipments under pressure
VERs are negotiated arrangements in which the exporting country self-limits exports, often to avoid harsher import restrictions.
Question 3: The concept of 'psychic distance' in international market entry refers to:
- Physical transportation costs between trade partners
- The perceived differences in language, culture, education, and business practices between countries (Correct answer)
- The psychological costs of relocating expatriate managers
- Emotional resistance to cross-border mergers among employees
Correct answer: The perceived differences in language, culture, education, and business practices between countries
Psychic distance captures how unfamiliar a foreign market feels to managers based on cultural, linguistic, and institutional differences.
Question 4: Which type of regional trade agreement eliminates internal tariffs but allows member countries to set their own external tariffs independently?
- Customs union
- Common market
- Free trade area (Correct answer)
- Economic union
Correct answer: Free trade area
A free trade area removes tariffs among members but each country retains sovereignty over its tariff schedule with non-members.
Question 5: A multinational expanding into an emerging market faces 'institutional voids,' meaning:
- Gaps in physical infrastructure such as ports and roads
- Absence of well-functioning market-supporting institutions like credit bureaus or contract enforcement (Correct answer)
- Political instability that creates regulatory uncertainty
- Low consumer purchasing power limiting market size
Correct answer: Absence of well-functioning market-supporting institutions like credit bureaus or contract enforcement
Institutional voids are the missing intermediaries (legal systems, credit agencies, regulators) that facilitate market transactions in developed economies.
Question 6: Under the IMF's Articles of Agreement, Special Drawing Rights (SDRs) are best described as:
- A global reserve currency issued and traded in open markets
- An international reserve asset created by the IMF to supplement member countries' official reserves (Correct answer)
- Low-interest loans provided to developing countries in crisis
- A basket index used to benchmark exchange rate fluctuations
Correct answer: An international reserve asset created by the IMF to supplement member countries' official reserves
SDRs are accounting units and supplementary reserve assets allocated to member countries and valued against a basket of major currencies.
Question 7: The 'diamond model' of national competitive advantage proposed by Michael Porter includes which four determinants?
- Factor conditions, demand conditions, related industries, firm strategy and rivalry (Correct answer)
- Natural resources, labor, capital, and technology
- Political stability, market size, trade openness, and education
- Government policy, currency strength, industry clusters, and innovation
Correct answer: Factor conditions, demand conditions, related industries, firm strategy and rivalry
Porter's Diamond identifies factor conditions, demand conditions, related/supporting industries, and firm strategy/rivalry as drivers of national competitiveness.
MIB Master of International Business: Global Business Environment 4
Which international monetary system replaced the gold standard after World War II and pegged currencies to the US dollar?