Question 1

The state's best strategy is to provide basic _________ in order to promote economic growth.

Accepted Answer

A)  health care services
B)  lifelong pensions for its workers
C)  economic and political stability
D)  natural resourcesE) C) and D)
F) None of the above

Question 2

High tax rates are a key indicator of country risk because they

Accepted Answer

A)  destroy incentives to work,save,and invest
B)  create large government deficits relative to GDP
C)  involve substantial government expenditures yielding low rates of return
D)  corrupt a well-functioning legal systemE) A) and D)
F) A) and C)

Question 3

which one of the following countries was capital flight unusually large due to economic regulations that were considered punitive?

Accepted Answer

A)  India
B)  Brazil
C)  Indonesia
D)  ChinaE) B) and C)
F) None of the above A

Question 4

Expropriation or creeping expropriation is most likely in the_____ sector of an economy.

Accepted Answer

A)  manufacturing
B)  agricultural
C)  construction
D)  extractiveE) B) and C)
F) None of the above

Question 5

A structure of incentives that rewards risk taking in productive ventures is an indicator of long-run _____________ health for a country.

Accepted Answer

A)  social
B)  political
C)  economic
D)  spiritualE) None of the above
F) C) and D)

Question 6

large government deficit relative to GDP,a high rate of money expansion accompanied by fixed exchange rates,along with substantial government expenditures are some of the common characteristics of _________ risk.

Accepted Answer

A)  exchange rate
B)  interest rate
C)  country
D)  investmentE) A) and B)
F) All of the above

Question 7

To halt capital flight,which one of the following would NOT be a constructive measure governments may take?

Accepted Answer

A)  cutting budget deficits
B)  impose comprehensive capital controls
C)  sell off state?owned enterprises
D)  allowing for freer tradeE) A) and B)
F) None of the above

Question 8

Frequently used indicators of political risk include economic factors but NOT

Accepted Answer

A)  inflation
B)  balance-of-payment deficits
C)  balance-of-payment surpluses
D)  health care reformE) A) and D)
F) A) and B)

Question 9

An oil company would NOT manage its political risk in Nigeria by

Accepted Answer

A)  taking out political risk insurance
B)  using foreign non-recourse financing
C)  selling oil in advance
D)  using local financingE) B) and D)
F) A) and D) D

Question 10

Which of the following foreign investments would be least subject to expropriation?

Accepted Answer

A)  an oil well in an LDC that is providing needed foreign exchange
B)  a coffee plantation that is producing beans for export
C)  an assembly plant for automobiles located in an LDC
D)  a tire making plant in an LDC that is substituting for tire importsE) A) and D)
F) All of the above

Question 11

Which one of the following is NOT a measure of political instability?

Accepted Answer

A)  the number of political parties in one nation
B)  frequency of changes of government
C)  the level of violence
D)  conflicts with neighboring statesE) B) and C)
F) A) and C)

Question 12

The economic experiences of Mexico,Chile,and Argentina in the recent past show that they all possessed a_________.

Accepted Answer

A)  political party system of many factions
B)  loosely drawn economic plan that is allowed to evolve over time
C)  political lead who is more of a manager than a leader
D)  head of state who demonstrates strong will and leadershipE) A) and B)
F) None of the above

Question 13

Capital flight occurs for several reasons,most of which have to do with

Accepted Answer

A)  government regulations on interest rates
B)  high taxes on local investments
C)  the threat of government seizure of local assets
D)  inappropriate economic policiesE) All of the above
F) A) and B)

Question 14

When investing in a natural resource project,a mining firm would NOT add value to the project by

Accepted Answer

A)  taking out political risk insurance from the home government
B)  using foreign financing
C)  selling copper in advance to customers
D)  using local financingE) A) and B)
F) A) and C)

Question 15

Which one of the following is NOT a form of direct political risk to the multinational corporation?

Accepted Answer

A)  currency controls
B)  privatization of public utilities
C)  changes in tax or labor laws
D)  regulatory restrictionsE) A) and D)
F) None of the above

Question 16

Political risk is primarily a function of

Accepted Answer

A)  instability in the government
B)  uncertainty over property rights
C)  the level of violence in the society
D)  a country's national debtE) B) and D)
F) A) and D)

Question 17

degree of political risk faced by a firm operating in a foreign country

Accepted Answer

A)  can be determined by using a political risk index
B)  depends on the benefits provided by the firm
C)  both a and b
D)  depends on how the firm has structured its operationsE) All of the above
F) B) and D)

Question 18

index that attempts to incorporate all of the economic,social and political factors related to country risk is the

Accepted Answer

A)  Profit Opportunity Recommendation rating
B)  Per capital income rating
C)  Gross domestic product
D)  Consumer price indexE) A) and D)
F) C) and D) A

Question 19

A U.S.company whose foreign property has been expropriated is most likely to receive legal aid and indemnification from

Accepted Answer

A)  OPIC
B)  the U.S.Supreme Court
C)  the International Center for Settlement of Investment Dispute
D)  the U.S.Appeals CourtE) A) and C)
F) B) and C)

Question 20

good indicator of political risk is

Accepted Answer

A)  the seriousness of capital flight
B)  the level of local interest rates
C)  the level of local tax rates
D)  a large middle class populationE) A) and D)
F) A) and C)

Exam 6: Country Risk Analysis

The state's best strategy is to provide basic _________ in order to promote economic growth.

Correct AnswerverifiedShow Answer

High tax rates are a key indicator of country risk because they

Correct AnswerverifiedShow Answer

which one of the following countries was capital flight unusually large due to economic regulations that were considered punitive?

Correct AnswerverifiedA

Expropriation or creeping expropriation is most likely in the_____ sector of an economy.

Correct AnswerverifiedShow Answer

A structure of incentives that rewards risk taking in productive ventures is an indicator of long-run _____________ health for a country.

Correct AnswerverifiedShow Answer

large government deficit relative to GDP,a high rate of money expansion accompanied by fixed exchange rates,along with substantial government expenditures are some of the common characteristics of _________ risk.

Correct AnswerverifiedShow Answer

To halt capital flight,which one of the following would NOT be a constructive measure governments may take?

Correct AnswerverifiedShow Answer

Frequently used indicators of political risk include economic factors but NOT

Correct AnswerverifiedShow Answer

An oil company would NOT manage its political risk in Nigeria by

Correct AnswerverifiedD

Which of the following foreign investments would be least subject to expropriation?

Correct AnswerverifiedShow Answer

Which one of the following is NOT a measure of political instability?

Correct AnswerverifiedShow Answer

The economic experiences of Mexico,Chile,and Argentina in the recent past show that they all possessed a_________.

Correct AnswerverifiedShow Answer

Capital flight occurs for several reasons,most of which have to do with

Correct AnswerverifiedShow Answer

When investing in a natural resource project,a mining firm would NOT add value to the project by

Correct AnswerverifiedShow Answer

Which one of the following is NOT a form of direct political risk to the multinational corporation?

Correct AnswerverifiedShow Answer

Political risk is primarily a function of

Correct AnswerverifiedShow Answer

degree of political risk faced by a firm operating in a foreign country

Correct AnswerverifiedShow Answer

index that attempts to incorporate all of the economic,social and political factors related to country risk is the

Correct AnswerverifiedA

A U.S.company whose foreign property has been expropriated is most likely to receive legal aid and indemnification from

Correct AnswerverifiedShow Answer

good indicator of political risk is

Correct AnswerverifiedShow Answer

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