Page 118 - Introduction to Business

92 PART 1 The Nature of Contemporary Business

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True/False Questions b. maintain low inflation with stable
exchange rates.
Please indicate if the following statements are true or
c. maintain a strong currency.
false:
d. achieve rapid growth with low inflation.
1. As in the nineteenth century, policymakers
e. achieve low inflation and unemployment
in government today can do little to effec-
at the same time.
tively manage the economy.
2. Which of the following is not an economic
2. Trying to keep inflation and unemployment
policy tool that countries have at their dis-
very low simultaneously is a difficult task.
posal to meet their economic goals?
3. Trade theory is based on the fact that in a
a. taxation and government spending policies
free enterprise and open economic system,
b. incomes policies
countries will specialize in the production
c. trade and exchange rate policies
and export of the goods and services that
d. interest rate and money supply policies
they turn out most efficiently.
e. mergers and acquisitions policies
4. Quotas are the worst form of barriers to
3. Trade is better than no trade for consumers
international trade.
in countries that practice free trade. Which of
5. In a free market system, the exchange rate is the following statements is not true?
a price—the price of one currency compared
a. Consumers will enjoy a greater amount of
with that of another currency.
choice in goods and services that they
6. Globalization has nothing to do with the buy.
elimination of barriers to trade, investment, b. Consumers will pay lower prices for
and information flow. imports and import-competing domestic
7. Regional integration occurs because groups goods and services.
of countries may have similar economic, c. Consumers will enjoy a higher standard of
social, or political objectives. living.
d. Domestically produced goods will become
8. U.S. sugar producers are not protectionists,
expensive.
although they are politically powerful (pro-
e. Consumers will have access to better
vide massive campaign contributions to both
quality goods.
the Democratic and Republican parties).
4. The worst barrier to international trade is
9. When domestic firms refrain from entering
overseas markets because of unfamiliarity a. tariffs.
with foreign cultures, foreign firms may take b. quotas.
that opportunity to enter the domestic c. counter trade.
market. d. low wage rates.
e. inadequate or non-existent infrastructure
10. Multinational enterprises are firms that have
(roads, etc.).
no home base, but own and control opera-
tions in other countries. 5. The U.S. Federal Reserve Bank sometimes
intervenes in the foreign exchange market to
control the value of the dollar. The dollar
Multiple-Choice Questions
therefore follows
Choose the best answer.
a. the fixed exchange rate system.
1. Which of the following statements is not true b. the floating exchange rate system.
in a free market economic system? The pri- c. the managed floating exchange rate
mary goal(s) of the government is(are) to system.
a. achieve rapid growth of real GDP with low d. the gold standard system.
unemployment. e. the Bretton Woods system.

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