BBB4M – International Business

SECTION 1 – TEST 1 REVIEW

Basic Economics

Choose a partner, or form a small group, and create a response for each of the following test-type questions. Answer using point form for study purposes. On the test, however, you must answer using full sentences to earn communication marks. The content needed to answer these questions can be found in the notes, quiz answers, and the assignments you have completed, along with points made and discussed in class.

1. / (a) / What is an economy?
(b) / How would you describe a successful economy?
(c) / Contrast a mixed economy, like Canada’s, with that of a command economy like the former Soviet Union.
(d) / How does scarcity force consumers to make choices?
2. / (a) / What is meant by the term monetary policy?
(b) / Describe how the Bank of Country X can adjust its monetary policy to
(i)Reduce inflation
(ii)Stimulate a slowing economy
3. / There are three ways a country can acquire wealth. What are they?
4. / The following statement was written in a recent Globe and Mail article: “... but GDP growth is expected to increase by 2.7% in 2008”. What does the author mean by writing this statement?
5. / How can the position of a country’s government on the political spectrum (LEFT, CENTRE, and RIGHT) affect the level of foreign investment in that country’s economy?
6. / Why is Venezuela, under Chavez, experiencing an inflation rate of almost 20%?
10. / Country X has an inflation rate of 10%/a, and it’s rising.
(a) / Why would an investor by very hesitant to invest money in X?
(b) / Assuming the inflation rate hits 15%/a, what would a 1 million investment be worth after 1 year?
7. / (a) / If the US economy moves into a recession, unemployment in Canada could increase significantly over time. Explain.
(b) / What economic indicators would Canadian business leaders look at to determine the confidence level of US consumers?
8. / Calculate the percent change of the CAD exchange rate if the CAD moves from 0.9600 USD to 0.9948 USD.
9. / What are two advantages and two disadvantages of having a strong Canadian dollar against the USD?
11. / Country A’s dollar is worth 0.81 of Country B’s dollar. Decide whether or not the following statements are true or false and explain why.
(a) / B’s dollar is stronger than A’s dollar.
(b) / Tourists from country A visiting country B would benefit from the exchange rate.
(c) / 1000 dollars is worth 810 A dollars.
(d) / Exports from B to A are more expensive than imports from A to B.
12. / The Canadian dollar is a commodity and its market price relative to other currencies is set by the actions of money market traders. Describe how the market price for the CAD is determined.
13. / Why is the supply graph represented by an upward, positively sloped line?
14. / Provide an example that illustrates how technological improvements can affect the supply of a good or service.
15. / Provide an example that illustrates how a change in consumer preferences can affect the demand for a good or service.
16. / Plot the supply and demand data given in the table below. Use the resulting supply and demand graph to estimate the market price for a leather jacket. Fully label the graphs and axes. (Draw a best fit line through the points.)
Use the graph to determine how many jackets will be sold that the market price.
PRICE ($) / DEMAND / SUPPLY
100 / 20,000 / 5,000
120 / 17,000 / 9,000
140 / 12,000 / 12,900
160 / 8,000 / 15,500
180 / 5,000 / 19,000
17. / What is OPEC, and why can this group able to control the market price of a barrel of oil?
18. / Use the factors of production to explain why countries in Europe (Ex. France) have more prosperous economies than that of Africa (ex. Liberia).