6.3 Business and the international economy

1     Globalisation is best defined as:

• 1)   increased international trade as a result of free movement of goods and capital between countries

• 1)   a situation where all of the world uses the same common currency

• 1)   the growing trend for companies to stop making products within their own country

• 1)   the increase in the world tourist industry leading to more global travel

1     One possible disadvantage to businesses of globalisation is that:

• 1)   all products will become more expensive

• 1)   there will be more international competition

• 1)   there will be less choice and variety for their consumers

• 1)   they will tend to produce on a small scale and this will raise costs

1     One possible opportunity for a business as a consequence of globalisation is:

• 1)   able to buy a wider range of imported materials and products

• 1)   more likely to be able to create a monopoly

• 1)   able to increase prices as there will be less competition

• 1)   able to sell products successfully in all foreign markets without changing the products

1     ‘Free international trade’ means that:

• 1)   goods can be transported between countries free of charge

• 1)   all countries use the same currency so it does not cost anything to convert currencies

• 1)   there are no tariffs or quotas to limit trade between countries

• 1)   businesses can produce in any country without any legal controls

1     The most likely reason why some governments impose tariffs on imported goods is:

• 1)   to reduce the rate of inflation

• 1)   to increase employment in foreign countries

• 1)   to reduce the Balance of Payments

• 1)   to increase output in their own countries

1     The difference between import tariffs and quotas is:

• 1)   tariffs are a tax on locally produced goods but quotas limit the quantity of imports

• 1)   tariffs are a tax on imports and quotas are a tax on exports

• 1)   tariffs are a tax on imports and quotas limit the quantity of imports

• 1)   tariffs are a tax on all products but quotas just limit the quantity of imports

1     A definition of a multinational business is one that:

• 1)   has a foreign sounding name

• 1)   imports goods from one country and exports them to another one

• 1)   exports goods to many different countries

• 1)   has factories or operations in more than one country

1     One advantage to the business of becoming a multinational is that:

• 1)   it will be able to produce goods closer to each country’s market

• 1)   it will have fewer factories and operating bases

• 1)   communication will be easier within the business

• 1)   it will tend to produce the same basic product for markets throughout the world

1     One potential advantage for a country of encouraging a multinational business to set up is that it will:

• 1)   always create more jobs than might be lost

• 1)   keep all of the profits made within the country

• 1)   not compete with the existing national businesses

• 1)   pay taxes to the government

1     One potential disadvantage for a country of encouraging a multinational business to set up is that:

• 1)   jobs might be lost in existing national businesses

• 1)   tax revenue to the government will fall

• 1)   these companies never export any products from the countries they operate in

• 1)   costs of production are likely to be high and this will raise prices