Question 5 The factors that affect the Current Account part of the balance of payments of a country include the following: Answers: Relative inflation rate, cost of domestic labor, and relative tax rates. Relative inflation rate, cost of domestic labor, and national income levels Cost of domestic labor, national income levels, and Privatization Relative Inflation rate, national income levels, and real interest rates Question 6 The factors that affect the DF portion of the Financial Account part of the balance of payments of a country include the following: Answers: Relative inflation rate, cost of domestic lobor, and tax rates. Expected economic growth, privatization, and tax rates Changes in governmental restrictions, national income levels, and Privatization Economic growth, tax rates, and national income levels Question 7 Which of the following theories identifles specialization as a reason for international business? Answers Product cycle theory Comparative advantage theory Imperfect markets theory Competitive advantage theory