BA1 - Fundamentals of Business Economics CIMAPRA17-BA1-1-ENG V8.02 Study Guide Killtest

2. The safer , easier way to help you pass any IT exams. 1.It is necessary to include a balancing item in the balance of payments accounts in order to A. Balance the current and capital accounts B. Ensure that balance of payments equilibrium is achieved C. Record accurately changes in the balance of official reserves D. Compensate for mistakes made when recording current and capital flows Answer: D 2.All of the following are elements of a supply side policy except which one? A. Reductions in the marginal rates of taxation. B. Increased entitlement to social security and unemployment benefits. C. Increased public expenditure on education and training. D. Privatization of public sector industries. Answer: B BA1 - Fundamentals of Business Economics CIMAPRA17-BA1-1-ENG V8.02 Study Guide Killtest C. An increase in the world price of oil D. A rise in interest rates Answer: A 3.A country has a trade deficit. The demand for its imports and exports are both price elastic. All of the following would lead to an a reduction in the country's trade deficit except which one? A. A fall in consumer incomes in the country. B. An improvement in the country's terms of trade. C. A depreciation in the exchange rate for the country's currency. D. A rise in the rate of inflation in its trading partners' economies. Answer: B 4.All of the following items would appear as a credit on the current account of a country's balance of payments accounts except which one? A. Interest payments on financial assets held overseas. B. Exports of manufactured goods. C. Outflows of capital. D. Expenditure by visiting foreign tourists. Answer: C 5.In a fully employed economy, which one of the following would lead to demand pull inflation? A. A reduction in the rate of income tax B. A rise in value added tax 6.Which of the following best defines a fiscal policy? A. A policy that increases government spending to increase national income B. A policy which seeks to influence the economy through manipulation of government spending and taxation C. A policy aimed at influencing the level of aggregate demand in the economy D. A policy which controls inflation by controlling the amount of money in the economy Answer: B 2 / 12

3. The safer , easier way to help you pass any IT exams. 7.Which one of the following policies to correct a balance of payments current account deficit is an example of an expenditure reducing policy? A. Depreciation of the currency. B. The imposition of an import tax. C. Increased income tax. D. The use of import quotas. Answer: C 8.Which global financial institution is responsible for making long term loans to assist developing countries to invest and develop? A. The IMF B. The World Bank C. The World Trade Organization D. The G20 Answer: B BA1 - Fundamentals of Business Economics CIMAPRA17-BA1-1-ENG V8.02 Study Guide Killtest 11.Which of the following would not be a reason for a government to impose a quota on imports? A. To plan the orderly decline of industries that have lost comparative advantage B. To prevent dumping C. To protect infant and strategic industries D. To prevent completely the country's citizens consuming an imported demerit good Answer: D 9.All of the following are typical features of the downswing phase of the trade cycle except one. Which ONE is the exception? A. A rise in the level of unemployment B. A fall in the rate of inflation C. The government budget balance moving towards a deficit D. The balance of payments current account moving towards a deficit Answer: D 10.If an economy went into a recession, which industry would experience the largest proportionate fall in sales, output and employment? A. Retail supermarkets B. Food processing industry C. Petrol retailing D. Luxury good manufacturers Answer: D 12.CORRECT TEXT A business is contemplating investing in a new project with a lifespan of three years and a capital cost of $100,000. The expected net cash flows from the project are as follows: 3 / 12

4. The safer , easier way to help you pass any IT exams. Year 1 $35,000 Year 2 $50,000 Year 3 $40,000 The cost of capital to the business is 10% The net present value of the project is: $ Answer: 3155, 3150, 3159, 3157, 3153, 3152, 3158, 3160, 3156, 3154, 3151 13.All of the following are objectives of not-for-profit organizations except one. Which ONE is the exception? A. Value for money B. Maximization of financial surpluses C. Serving the public interest effectively D. Efficient use of physical and human resources Answer: B BA1 - Fundamentals of Business Economics CIMAPRA17-BA1-1-ENG V8.02 Study Guide Killtest C. A tax which rises less than proportionately with income D. A tax on expenditure Answer: C 14.Which ONE of the following is regarded as a general characteristic of an organization? A. Controlled performance of its activities B. Social goals towards society C. Collective goals towards society D. Social arrangement of people Answer: B 15.A government might increase its budget deficit in order to reduce A. Demand-deficient or cyclical unemployment B. Frictional unemployment C. Technological unemployment D. Classical or real-wage unemployment Answer: A 16.Select the best definition of a regressive tax from the options below: A. A tax which rises proportionately with income B. A tax which rises more than proportionately with income 17.All of the following are early indicators of a recovery from a recession except which one? A. A rise in business confidence. B. An acceleration in the growth of the money supply. C. A fall in the level of net personal debt. D. An increase in the number of unfilled vacancies. Answer: C 4 / 12

5. The safer , easier way to help you pass any IT exams. 18.If a government adopted a fiscal policy of cutting its budget deficit, the aggregate demand and supply model shows that the result would be: A. a shift in the aggregate demand curve to the right, a fall in output and employment and a rise in the price level B. a shift in the aggregate demand curve to the left, a fall in output and employment and a fall in the price level C. a shift in the aggregate demand curve to the left, a fall in output and employment and a rise in the price level D. a shift in the aggregate demand curve to the right, a rise in output and employment and a rise in the price level Answer: B BA1 - Fundamentals of Business Economics CIMAPRA17-BA1-1-ENG V8.02 Study Guide Killtest 19.Which of the following would lead to an increase in a firm's share price? A. Management announces that profits are still rising in line with the forecasts in its published 5 year plan B. Management announces that profits will be higher than had previously been forecast C. A rise in the rate of interest available from investing in government securities D. Management announces that new laws on working conditions have forced them to close a profitable factory earlier than had been expected Answer: B 20.Which of the following is an invisible import for a country? A. Expenditure in its shops by foreign diplomats based in the country B. The country's contribution to foreign aid C. A foreign company signing a contract guaranteeing to invest in a new factory in the country D. Repayment of an IMF loan by the country's government Answer: B 21.All of the following items would appear as a credit on the current account of a country's balance of payments accounts except which one? A. Interest payments on financial assets held overseas. B. Exports of manufactured goods. C. Outflows of capital. D. Expenditure by visiting foreign tourists. Answer: C 22.Part of a country's unemployment figures will consist of people moving between jobs. Which type of unemployment is this? A. Structural unemployment B. Cyclical (or demand deficient) unemployment C. Frictional unemployment D. Real wage unemployment Answer: C 23.As the process of globalization increases, typical businesses will 5 / 12

6. The safer , easier way to help you pass any IT exams. A. Depend more and more on their domestic markets. B. Have to raise more capital from internal sources. C. Have less need to increase their international competitiveness. D. Be more and more affected by changes in exchange rates. Answer: D 24.CORRECT TEXT A bond has a coupon rate of 7%, a nominal value of $100 and a market price of $140 The percentage running yield is % Answer: 5 BA1 - Fundamentals of Business Economics CIMAPRA17-BA1-1-ENG V8.02 Study Guide Killtest 28.The Phillips curve shows that the government A. cannot use monetary policy to reduce the level of unemployment without causing a rise in interest rates. B. can only use fiscal policy to reduce the rate of unemployment in the short run but not in the long run. C. can only use expansionary policy to reduce the level of unemployment if it is prepared to accept a higher rate of inflation. D. in the long run expansionary fiscal and monetary policy can only lead to higher inflation and higher unemployment. Answer: C 25.Which of the following best defines “aggregate supply”? A. The stock of output available for sale in an economy B. The full employment level of output of the economy C. The flow of goods and services produced by an economy during the year D. The level of prices at which output can be sold in an economy Answer: C 26.Which global financial institution is responsible for providing stabilization funding to assist developed and developing countries with short term borrowing needs and needs for foreign currency? A. The IMF B. The World Bank C. The World Trade Organization D. The G20 Answer: A 27.A country is a net oil exporter and the demand for oil overseas is price inelastic. A substantial increase in the world price of oil would tend to A. Improve the country's balance of payments on current account B. Improve the price competitiveness of manufacturing firms in the country C. Cause the country's terms of trade to deteriorate D. Increase GDP but not GNP in the country Answer: A 6 / 12

7. The safer , easier way to help you pass any IT exams. 29.Which of the following is the most likely cause of a demand deficient unemployment (or cyclical unemployment)? A. A fall in domestic interest rates B. Significantly lower labor costs available in a developing country C. Improvement in the terms of trade D. Excess aggregate demand in the economy of a trading partner Answer: C 30.Which of the following is most likely to lead an economy to suffer high unemployment? A. Withdrawals exceeding injections B. Aggregate demand exceeding aggregate supply C. Injections exceeding withdrawals D. A fiscal deficit Answer: A BA1 - Fundamentals of Business Economics CIMAPRA17-BA1-1-ENG V8.02 Study Guide Killtest C. Only a customs union is an example of a multilateral trading agreement D. Only a free trade area involves common economic policies Answer: A 31.In a customs union member countries A. Meet to agree tariff increases affecting internal trade between themselves B. Trade freely with each other and impose their own national restrictions on trade with the rest of the world C. Trade freely with each other and accept a common external tariff for trade with the rest of the world D. Replace national currencies with a common currency such as the Euro Answer: C 32.Which of the following is not likely to result from a fall in the rate of interest? A. Increased consumption B. Increased investment C. A higher exchange rate D. An increase in aggregate demand Answer: C 33.An important distinction between a free trade area and a customs union is that A. Only a customs union erects a common external tariff B. Only a free trade area allows free internal trade in services as well in goods 34.Which ONE of the following would appear as a debit item on a country's balance of payments current account? A. Overseas investment by a domestic multinational company B. Expenditure in the country by an overseas visitor C. A flow of company profits to the parent company based in another country D. Payment by an overseas company for services provided in the country Answer: C 7 / 12

8. The safer , easier way to help you pass any IT exams. 35.The level of national income in the circular flow will remain constant if A. injections are greater than withdrawals B. injections are equal to withdrawals C. injections are equal to savings D. injections plus withdrawals are equal to savings plus investment Answer: B 36.In a recession which ONE of the following would be likely to experience the largest fall in demand for its products? A. A manufacturer of industrial machine tools B. A chain of supermarket grocery stores C. A motor insurance company D. A toothpaste manufacturer Answer: A BA1 - Fundamentals of Business Economics CIMAPRA17-BA1-1-ENG V8.02 Study Guide Killtest 39.All of the following are features of the process of globalization except which one? A. Increased flows of factors of production between economies. B. Higher international disparities in rates of return on capital. C. Increasing interdependence between economies. D. Higher levels of trade in components and semi-finished goods. Answer: B 37.Which ONE of the following would best indicate that economic growth is taking place? An increase in: A. The economy's output gap B. Investment to make good wear and tear of the national capital stock C. Investment in human capital D. Gross domestic product sustained over a number of years Answer: D 38.The imposition of a tariff on imported goods by a country's government will result in all of the following except one. Which ONE is the exception? A. A shift in domestic income from consumers to producers of the goods B. A rise in the domestic price of the imported good C. Greater cost push inflationary pressure in the economy D. A shift to the left in the demand curve for the imported good Answer: D 40.Which ONE of the following is an External stakeholder in a state-owned energy provider? A. The industry regulator B. A firm selling equipment to the energy provider C. Customers of the energy provider 8 / 12

9. The safer , easier way to help you pass any IT exams. D. The government Answer: A 41.Oxfam is a charity established to provide aid to the poor. Which ONE of the following statements about Oxfam is FALSE? A. It is a private sector organization B. It pursues social goals C. It is a not-for-profit organization D. It is responsible to its shareholders Answer: D BA1 - Fundamentals of Business Economics CIMAPRA17-BA1-1-ENG V8.02 Study Guide Killtest A. Money be ignored because reaching the goals of the organization is all that matters B. There is no need for the organization to be efficient C. There is a trade off between financial and non-financial goals D. Money limits how far the organization can achieve its goals Answer: D 42.Which of the following statements about macroeconomic policy objectives is correct? A. Governments always regard control of inflation as the most important policy objective B. Conflicts between objectives mean that macroeconomic policy can never be regarded as successful C. Expanding demand to reduce unemployment may mean that the balance of payments worsens D. The pursuit of economic growth inevitably increases unemployment Answer: C 43.CORRECT TEXT A business was selling 20,000 units of its product per month at a price of $10. When it lowers its price to $9 it finds that its sales rise to 24,000 units per month. The price elasticity of demand for this firm's product is Answer: -2 44.Which of the following economic conditions is likely to lead to demand-pull inflation? A. An increase in interest rates and a rise in the world price of oil B. An increase in government spending and firms operating at full capacity C. Increased monopoly power in goods and labor markets D. A worsening balance of payments deficit and a rising exchange rate Answer: B 45.Which ONE of the following best explains the statement 'In not for profit organizations money is a constraint and not a goal'? 46.If in a boom a government adopted a contractionary (restrictive) monetary policy, a typical business would expect to experience: i. Higher interest payments on its bank borrowing. ii. Falling credit based sales. iii. Higher income and corporate taxes. 9 / 12

10. The safer , easier way to help you pass any IT exams. iv. Lower sales to government agencies. v. Difficulties in securing working capital vi. Higher prices for imported components. A. (i), (ii) and (vi) only B. (i), (ii) and (v) only C. (ii), (iii) and (iv) only D. (i), (iii) and (iv) only Answer: B 47.A country's gross national product (GNP) will be higher than gross domestic product (GDP) if: A. indirect taxes are greater than government subsidies B. there is a net inflow of factor payments on the balance of payments C. the country's imports are greater than its exports D. government tax income is greater than government expenditure Answer: B BA1 - Fundamentals of Business Economics CIMAPRA17-BA1-1-ENG V8.02 Study Guide Killtest B. A rightward shift of the aggregate demand curve C. A rightward shift of the long-run aggregate supply curve D. A leftward shift of the aggregate demand curve Answer: A 48.In the aggregate supply and demand model, a significant rise in the cost of energy for industry would lead to the A. Aggregate supply curve moving to the right B. Aggregate supply curve moving to the left C. Aggregate demand curve moving to the right D. Aggregate demand curve moving to the left Answer: B 49.Which one of the following would raise both national income and disposable income ? A. An increase in transfer payments B. A reduction in rates of personal income tax C. An increase in business profits D. A rise in the rates of personal income tax Answer: C 50.On an aggregate demand and aggregate supply diagram, cost-push inflation is shown by A. A leftward shift of the short-run aggregate supply curve 51.If a country joined an economic union (for example, the European Union) its business sector could benefit from all of the following except which one? A. Higher profit margins due to a reduction in transport costs. B. Economies of scale as it gained access to a larger market. C. Lower input costs as imports from other member states would become cheaper. D. Reduced costs as a result of access to a wider supply of factors of production. 10 / 12

11. The safer , easier way to help you pass any IT exams. Answer: A 52.Which of the following statements about supply-side economics is correct? A. Supply-side policies are part of aggregate demand management policies. B. Fiscal policy cannot be used as a part of supply-side policy C. Supply-side economists always reject the use of policy to expand demand D. Supply-side policies are used to improve the economy's efficiency and competitiveness Answer: D 53.Which ONE of the following is NOT required in calculating the EPS of ABC plc? A. The market price of ABC's share B. The number of shares ABC has in issue C. The most recent earnings after interest and tax of ABC D. The dividend payment made to holders of preference shares Answer: A BA1 - Fundamentals of Business Economics CIMAPRA17-BA1-1-ENG V8.02 Study Guide Killtest A. Raising shareholder wealth B. Long term growth in sales C. Meeting regulatory, accounting and reporting standards D. Maximizing profit Answer: C 54.A surplus on the current account of the balance of payments can be financed by A. An inflow of capital on the capital account. B. Lending abroad on the capital account. C. A fall in the foreign exchange reserves D. A surplus on the government budget. Answer: B 55.Which global institution is concerned with co-coordinating economic policies and agreeing banking and financial regulations? A. The IMF B. The World Bank C. The World Trade Organization D. The G20 Answer: D 56.All of the following are regarded as objectives of profit seeking organizations except one. Which ONE is the exception? 57.The equilibrium level of national income in an economy is the level of income at which A. Full employment occurs B. There is zero inflation C. Total planned spending equals the supply of output available D. The government's budget and the balance of payments are both exactly balanced 11 / 12

12. The safer , easier way to help you pass any IT exams. Answer: C 58.CORRECT TEXT A business has fixed costs of $200. Its total variable costs at different levels of output are as follows: The business can always sell its output at a price of $100 per unit The profit maximizing level of output is Answer: 4 59.Which of the following is not taken into account by the discount factor applied to future earnings when calculating shareholder value? A. Shareholders rate of time preference for money B. The amount of earnings that will be lost as taxation C. The amount of risk the investment is subject to D. The rate of inflation Answer: B BA1 - Fundamentals of Business Economics CIMAPRA17-BA1-1-ENG V8.02 Study Guide Killtest 60.All of the following would result from a shift from direct to indirect taxes except which one? A. An increase in the prices of products due to inflation. B. A reduction in the disincentive to work and effort. C. A more progressive taxation system. D. A shift in the burden of taxation towards lower income groups. Answer: C 12 / 12