MNC Free Trade and Exchange Rates `

How would a state-owned oil refining firm be classified?

• as a multi-national company (MNC) in the private sector

• as a private sector firm in the tertiary sector

• as a public sector firm in the primary sector

• as a public sector firm in the secondary sector

How might a multinational company (MNC) directly benefit a host country?

• It creates local employment.

• It depletes local natural resources.

• It imports raw materials.

• It receives tax concessions.

Which method of trade protection would enable domestic firms to lower their prices and undercut the price of imported goods?

• a subsidy

• a tariff

• an embargo

• an import quota

What usually decreases when there is a depreciation of a country’s foreign exchange rate?

• the level of national debt

• the level of trade protection

• the price of exports

• the price of imports

A country imposes tariffs and quotas on imported goods.

What will citizens of that country experience?

• higher prices

• higher unemployment

• higher welfare

• wider consumer choice

Skin creams preventing sunburn made in the European Union (EU) are more effective than those made in the United States (US). US tourists stock up on the creams when visiting Europe. Such creams are banned from production in the US because of the chemicals in them. In 2013, negotiations began to remove this ban in order to allow production in the US.

How is this freer trade likely to affect manufacturers of skin creams in the US and the EU?

• manufacturers in the US gain

  manufacturers in the EU gain

• manufacturers in the US gain

  manufacturers in the EU lose

• manufacturers in the US lose

  manufacturers in the EU gain

• manufacturers in the US lose

  manufacturers in the EU lose

Which method of trade protection has the most predictable effect in controlling the level of

imports?

• quotas on imports

• safety and quality regulations for imports

• subsidies to domestic producers

• tariffs on imports

In October 2015, one UK pound could be exchanged for 100 Indian rupees. By October 2016, one UK pound could be exchanged for 80 Indian rupees.

What would be a short-term consequence of this change?

• Economic growth in India would increase.

• Indian manufacturers would earn higher profits from exports to the UK.

• Inflationary pressure in the UK would reduce.

• UK manufacturers would find it easier to export to India.

What is the least likely feature of globalisation?

• integration of trade

• international capital flows

• the spread of multinational companies

• unrestricted movement of labour

What is likely to cause a rise in a country’s foreign exchange rate?

• a fall in its exports of goods and services

• a fall in its imports of goods and services

• a fall in its inflow of income

• a rise in its outflow of transfers