Unit 2 Test SOLUTIONS

TOTAL: /55 mks

Knowledge/Understanding

Fill in the Blanks- Terminology (15 marks)

  1. Multinational firms can take this and leave to invest in lower-wage countries. __Capital________
  2. Many consumers wanting to know not only what they are buying, but how it was made is an example of _____values-based consumerism______.
  3. Fair trade coffee, organic food, and lumber from sustainable forests are examples of values-based standards.
  4. Most of the foods that we commonly eat today are the product of globalization.
  5. Fair Trade is a trading partnership based on dialogue, transparency and respect that seeks greater equity in international trade.
  6. This depends on supply and demand, which are affected by many factors, including interest-rate differentials, relative inflation, export competitiveness, economy growth, deficits, and debt. Price of a currency.
  7. The Canadian dollar is said to be a secondary currency in relationship to the United States dollar.
  8. The euro is the currency of fifteen European union countries.
  9. The International Monetary Fund (IMF), the World Bank and the General Agreement on Tariffs and Trade (GATT) - were established to solve global economic problems.
  10. British economist, John Maynard Keynes proposed a world reserve currency administered by a single central bank at this conference. Bretton Woods.
  11. The Paris Club is an informal group of official creditors whose role is to find co-ordinated and sustainable solutions to the payment difficulties experienced by debtor nations.
  12. A cooperation established in 1989 to enhance economic growth and prosperity for its members and to strengthen the Asia-Pacific community. Asia-Pacific Economic Cooperation (APEC).
  13. Exportsource.ca, InfoExport, and Invest in Canada are three key business programs offered by this organization. Foreign Affairs and International Trade.
  14. Information about local Big Mac prices has been combined with foreign exchange rates to serve as an unscientific indicator of future movements in currency exchange rates. This is called the Big Mac Index.
  15. Standards ensure that materials, products, processes, and services are appropriate for their purpose.

Thinking/Inquiry

Short Answer- (30 marks)

Question 1a:

Explain five basic principles of The Fair Trade Federation. Use an example for each reason. (10 marks)

Basic Principles of The Fair Trade Federation / Example

Create Opportunities for Economically and Socially Marginalized Producers

Fair Trade is a strategy for poverty alleviation and sustainable development. Members create social and economic opportunities through trading partnerships with marginalized producers. Members place the interests of producers and their communities as the primary concern of their enterprise.

Develop Transparent and Accountable Relationships

Fair Trade involves relationships that are open, fair, consistent, and respectful. Members show consideration for both customers and producers by sharing information about the entire trading chain through honest and proactive communication. They create mechanisms to help customers and producers feel actively involved in the trading chain. If problems arise, members work cooperatively with fair trade partners and other organizations to implement solutions.

Build Capacity

Fair Trade is a means to develop producers’ independence. Members maintain long-term relationships based on solidarity, trust, and mutual respect, so that producers can improve their skills and their access to markets. Members help producers to build capacity through proactive communication, financial and technical assistance, market information, and dialogue. They seek to share lessons learned, to spread best practices, and to strengthen the connections between communities, including among producer groups.

Promote Fair Trade

Fair Trade encourages an understanding by all participants of their role in world trade. Members actively raise awareness about Fair Trade and the possibility of greater justice in the global economic system. They encourage customers and producers to ask questions about conventional and alternative supply chains and to make informed choices. Members demonstrate that trade can be a positive force for improving living standards, health, education, the distribution of power, and the environment in the communities with which they work.

Pay Promptly and Fairly

Fair Trade empowers producers to set prices within the framework of the true costs of labor, time, materials, sustainable growth, and related factors. Members take steps to ensure that producers have the capacity to manage this process. Members comply with or exceed international, national, local, and, where applicable, Fair Trade Minimum standards for their employees and producers. Members seek to ensure that income is distributed equitably at all times, particularly equal pay for equal work by women and men. Members ensure prompt payment to all of their partners. Producers are offered access to interest-free advance payment for handmade goods, or pre-finance of agricultural harvest with favorable terms.

Support Safe and Empowering Working Conditions

Fair Trade means a safe and healthy working environment free of forced labor. Throughout the trading chain, Members cultivate workplaces that empower people to participate in the decisions that affect them. Members seek to eliminate discrimination based on race, caste, national origin, religion, disability, gender, sexual orientation, union membership, political affiliation, age, marital, or health status. Members support workplaces free from physical, sexual, psychological, or verbal harassment or abuse.

Ensure the Rights of Children

Fair Trade means that all children have the right to security, education, and play. Throughout the trading chain, Members respect and support the UN Convention on the Rights of the Child, as well as local laws and social norms. Members disclose the involvement of children in production. Members do not support child trafficking and exploitative child labor.

Cultivate Environmental Stewardship

Fair Trade seeks to offer current generations the ability to meet their needs without compromising the ability of future generations to meet their own needs. Members actively consider the implications of their decisions on the environment and promote the responsible stewardship of resources. Members reduce, reuse, reclaim, and recycle materials wherever possible. They encourage environmentally sustainable practices throughout the entire trading chain.

Respect Cultural Identity

Fair Trade celebrates the cultural diversity of communities, while seeking to create positive and equitable change. Members respect the development of products, practices, and organizational models based on indigenous traditions and techniques to sustain cultures and revitalize traditions. Members balance market needs with producers’ cultural heritage.

Question 1b:

List five of the top ten most popularly traded currencies in the world. Indicate the name of the currency and the country it’s from.

Country / Name of Currency
# / Currency / Country
1 / US Dollar / USA
2 / Euro / Europe
3 / Yen / Japan
4 / British Pound / Great Britain
5 / Aus Dollar / Australia
6 / Franc / Switzerland
7 / Canadian Dollar / Canada
8 / Mexican Peso / Mexico
9 / Yuan / China
10 / NZ Dollar / New Zealand

Question 2:

Why did many members of the European Union decide to make the Euro, one common currency? (2 marks)

The euro provided several economic advantages to the citizen of the EU. Travel was made easier by removing the need for exchanging money, and more importantly, the currency risks were removed from European trade.Labor and goods can flow more easily across borders to where they are needed, making the whole work more efficiently. It is managed by the European Central Bank. The ECB has to balance the needs of all the member nations and therefore is more insulated from political pressure to inflate or manipulate the currency to meet any one nation's needs.

Question 3: (4 marks)

Explain how Nixon’s unilateral announcement on August 15, 1971, dealt a fatal blow.

On August 15, 1971, without prior warning to the leaders of its most important economic partners, President Richard Nixon announced in a Sunday evening televised address to the nation that the United States was removing the direct convertibility of the United States dollar to gold. The commitment by the United States to redeem international dollar holdings at the rate of $35 per ounce had formed the central foundation of the post-war international financial system set in place at the Bretton Woods conference of 1944. Nixon’s unilateral announcement dealt it a fatal blow.

Question 4: ( 6 marks)

What are some of the Universal Benefits of Standardization? List three and provide an example.

Benefit / Example

Traffic light colours - universally red indicates stop, amber indicates caution and green indicates go.

Containerization - standardized containers and their handling technology now move the majority of freight worldwide.

Confidence - every day millions of people step into elevators, board airplanes, and work in high-rise buildings, safe in the knowledge that the architects and engineers who designed them applied the most rigorous engineering standards.

Ease of choice - worldwide we have just three basic choices to make when fitting a light bulb to a socket: screw or bayonet, wattage, and clear or pearl?

Universality - In the next few years, you will see soft phones with USB wired and wireless headsets, notebook computers and monitors with built-in speakers and microphones, USB phones, and wireless phones (cell, dual mode, WiFi, WiMax, even DECT) begin replacing traditional proprietary PBX/IP PBX phones.

Electrical safety - standardization of the inherent safety characteristics of electrical systems and devices ensures a near 100% safety record.

Question 5:

Discuss three of the ISO Standards and give an explanation for each. (6 marks)

1. Focus on your customers!

Organizations rely on customers. Therefore:

Organizations must understand customer needs.

Organizations must meet customer requirements.

Organizations must exceed customer expectations.

2. Provide leadership!

Organizations rely on leaders. Therefore:

Leaders must establish a unity of purpose and set the direction the organization should take.

Leaders must create an environment that encourages people to achieve the organization's objectives.

3. Involve Your People!

Organizations rely on people. Therefore:

Organizations must encourage the involvement of people at all levels.

Organizations must help people to develop and use their abilities.

4. Use a Process Approach!

Organizations are more efficient and effective when they use a process approach. Therefore:

Organizations must use a process approach to manage activities and related resources.

5. Take a Systems Approach!

Organizations are more efficient and effective when they use a systems approach. Therefore:

Organizations must identify interrelated processes and treat them as a system.

Organizations must use a systems approach to manage their interrelated processes.

6. Encourage Continual Improvement!

Organizations are more efficient and effective when they continually try to improve. Therefore:

Organizations must make a permanent commitment to continually improve their overall performance.

7. Get the Facts Before You Decide!

Organizations perform better when their decisions are based on facts. Therefore:

Organizations must base decisions on the analysis of factual information and data.

8. Work with Your Suppliers!

Organizations depend on their suppliers to help them create value. Therefore:

Organizations must maintain a mutually beneficial relationship with their suppliers.

Question 6:

Discuss one benefit and one potential problem of Dollarization. (2 marks)

BENEFITS:

Greater foreign exchange stability

This would tend to promote increased trade and investment between businesses and that countries that adopt the common currency

Dollarization would eliminate controversies about dumping that arise from fixed exchange rate policies such as China’s.

POTENTIAL PROBLEMS:

Takes away ability to determine an independent monetary policy.

Nationalism remains an obstacle.

People are loyal to their currency.

They may believe they would be giving up sovereignty by relinquishing their currency for another.

Application & Communication

Case Study (10 marks)

Read the following case and provide your recommendation. Make sure to look at the marking key below before you start!

Marking Key:

  • 3 Points Made: /3 marks
  • Rationale Provided for these points: /3 marks
  • Spelling/Grammar: /2 marks
  • Paragraph structure: /1 mark
  • 1 page length: /1 mark

Canada-United States Merged

There are many ideas out there which suggest that if Canada merged with the United States, a lot of things would be better for both countries. First of all, the United States would acquire a greater amount of land, the Canadian dollar would rise and there would be more access to markets in the United States offering a better ground for Canadian entrepreneurs.

Arguments against the collusion of the two countries state that Canadians have a different view of themselves, of government and of rights and freedoms...these cultural divisions would cause problems in a united government.

Write one page indicating whether you think Canada and the United States should merge, and what would be the benefits of doing so. You may use one example provided in the text above, but the remaining examples must be your own thoughts using examples accurate to this scenario in today’s economy.