10 free sample questions with answers and explanations. See how you'd score on the real CLEP exam.
What is the effect of an embargo on the economy of the targeted country?
It increases economic growth
It reduces inflation
It increases trade with other countries
It reduces the standard of living
It has no effect on the economy
Explanation
It reduces the standard of living is correct because an embargo restricts the flow of goods and services, leading to shortages and higher prices, which reduces the standard of living, by limiting access to essential goods.
How do tariffs affect domestic producers?
They increase competition from foreign producers
They reduce prices for domestic consumers
They increase revenue for the government
They protect domestic producers from foreign competition
They reduce the trade deficit
Explanation
They protect domestic producers from foreign competition is correct because tariffs make imported goods more expensive, giving domestic producers a competitive advantage, by reducing foreign competition.
What is a quota?
A tax on imported goods
A ban on all trade with a country
A limit on the quantity of goods imported
A subsidy for domestic producers
A trade agreement between nations
Explanation
A limit on the quantity of goods imported is correct because quotas restrict the amount of goods that can be imported, by setting a quantitative limit on imports.
What is the purpose of an embargo?
To increase trade with a country
To reduce the trade deficit
To reduce inflation
To promote domestic industries
To punish or pressure a country
Explanation
To punish or pressure a country is correct because embargoes are used as a political tool to restrict trade with a particular country, by banning all trade with that country.
What is a tariff?
Tax on imported goods
Ban on all trade with a country
Limit on the number of goods imported
Subsidy for domestic producers
Trade agreement between nations
Explanation
A tax on imported goods is correct because tariffs are imposed by governments to raise revenue and protect domestic industries, by applying a tax on imported goods.
What is a potential disadvantage of franchising as a global entry mode?
High level of control over foreign operations
Ability to adapt products to local markets
Loss of control over franchisees
High level of market research required
Requirement for a large amount of capital
Explanation
Loss of control over franchisees is correct because franchising involves giving franchisees a significant amount of autonomy, which can lead to a loss of control over the franchisees' operations and decision-making.
What is a common advantage of exporting as a global entry mode?
High level of control over foreign operations
High level of market research required
Ability to adapt products to local markets
Low risk and low investment
Requirement for a large amount of capital
Explanation
Low risk and low investment is correct because exporting allows companies to enter a foreign market with minimal investment and risk, as they do not need to establish a physical presence in the market.
Which global entry mode involves a company giving another company the right to use its brand and business model?
Exporting
Licensing
Joint Venture
Franchising
Strategic Alliance
Explanation
When you stop by a McDonald's in your hometown, you're experiencing a global brand that has allowed another company to use its name and business model. This is an example of Franchising, where a company gives another the right to use its brand and business model. In contrast, Exporting is a different approach, where a company simply sells its products to another country without sharing its business model.
Which e-commerce payment method involves the transfer of funds from a customer's bank account to a merchant's account?
Credit card
Debit card
Electronic fund transfer (EFT)
Online invoice
Digital wallet
Explanation
Electronic fund transfer (EFT) is correct because it enables the direct transfer of funds between bank accounts, applying the concept of online payment systems to facilitate secure and efficient transactions.
Which of the following is a benefit of using social media in e-commerce marketing?
Reduced customer engagement
Increased marketing costs
Improved brand awareness
Decreased website traffic
Limited customer feedback
Explanation
Social media platforms provide a vast audience and various tools to promote products, making improved brand awareness a key benefit of using social media in e-commerce marketing. This increased online presence helps businesses reach a larger customer base and build brand recognition.