Business Economics Flashcards
It is necessary to include a balancing item in the balance of payments accounts in order to
compensate for mistakes made when recording current and capital flows.
increased entitlement to social security and unemployment benefits
is not a supply side policy.
A country has a trade deficit. the demand for its imports and exports are price elastic.
an improvement in the country’s terms of trade would not lead t a reduction in the country’s trade deficit.
outflows of capital
does not appear as a credit on the current account of a country’s balance
in a fully employed economy a reduction in the rate of income tax
would lead to demand pul inflation
fiscal policy is a policy
which seeks to influence the economy through manipulation of government spending and taxation
increased income tax is an eg of
an expenditure reducing policy
The world bank is responsible for
making long term loans to assist developing countries to invest and develop
the balance of payments current account moving towards a deficit
is not a typical feature of the downing phase of the trade cycle.
if an economy went into recession luxury good manufacturers
would experience the largest proportionate fall in sales, output and employment.
government would not impose a quota on imports to
prevent completely the citizens consuming an imported demerit good.
maximisation of financial surpluses
is not an objective of not for profit organisations
social goals towards society
is a general characteristic of an organisation.
a government might increase its budget deficit in order to reduce
demand deficient or cyclical unemployment
regressive tax is a tax which
rises less than proportionately with income
all fall in the level o feet personal debt is not
an early indicator from a recession
if a government adopted a fiscal policy of cutting its budget deficit the aggregate demand and supply model show that the result would be
a shift to the aggregate demand curve to the left, a fall in output and employment and a fall in the price level
management announces that profits will be higher than previously forecast
would lead to an increase in a firm’s share price
invisible import
country’s contribution to foreign aid
outflows of capital
is not a credit on the current account of a country’s balance of payments accounts.
frictional unemployment
people moving between jobs
as globalisation increases
businesses more affected by hinges in exchange rate
aggregate supply
flow of goods and services produced by an economy during the year
IMF provides stabilisation funding to assist developed and developing countries with
short term borrowing needs and needs for foreign currency
a country is a net oil exporter and the demand for oil overseas is price inelastic. a substantial increase in the world’s price of oil would
improve the country’s balance of payments on current account
phillips curve shoes that the government can only use expansionary policy to reduce the level of unemployment if
it is prepared to accept a higher rate of inflation
improvement in terms of trade is the most likely cause of
demand deficient / cyclical unemployment.
improvement in the terms of trade
is the most likely cause of demand deficient / cyclical unemployment.
withdrawal exceeding injections is most likely to lead to an economy
suffer high unemployment
in a customs union member countries
trade freely with each other and accept a common external tariff for trade with the rest of the world
a higher exchange rate
is not likely to result from the fall in the rate of interest rate
distinction between a free trade area and a customs union is
only a customs union erects a common external tariff
a flow of company profit to the parent company based in another country
would appear as a debit item on a country’s balance of payments current account
the level of national income in the circular flow will remain constant if
injections are equal to withdrawals
manufacturer of industrial machine tools
experience largest fall in demand for its products
increase in gdp sustained over a number of years
indicates economic growth taking place
shift to left in demand curve for imported good
would not lead to the imposition of a tariff on imported goods by a country’s government
higher international disparities in rates of return on capital
is not a feature of the process of globalisation
industry regulator
external stakeholder in a state-owned energy provider
charities are not responsible to
their shareholders
macroeconomic policy objective
expanding demand to reduce unemployment may mean that the balance of payments worsens
an increase in the government spending and firms operating at full capacity
is lily to lead to demand-pull inflation
in not for profit organisation money is a constraint and not a goal
money limits how far the organisation can achieve its goals
if in a boom a government adopted a contractionary/ restrictive monetary policy a typical business would expect to experience
Higher interest payment on bank borrowing.
Falling credit based sales.
Difficulties in securing working capital
GNP higher than GDP if
net inflow of factor payments on the balance of payments
aggregate supply and demand model a significant rise in cost of energy for industry would lead to the
aggregate supply curve moving to the left
increase in business profits
would raise both national and disposable income
on an aggregate demand and aggregate supply diagram, cost push inflation is shown by
a leftward shift of shirt-run aggregate supply curve
if country joined an economic union its business score would not benefit from
higher profit margins due to a reduction in transport costs
supply-side policies re used to improve the the
economy’s efficiency and competitiveness
market price of company shares
not required in calculating the EPC of company
surplus on the current account of balance of payments can be financed by
lending abroad on the capital amount
G20 concerned with
co-oridinating economic oldies and
agreeing banking and financing regulations
meeting regulatory, accounting and reporting standards
is not an objective of a profit seeking organisation
equilibrium level of national income in an economy is the level of income at which
total planned spending equals the supply of output available
amount of earnings that will be lost as taxation
not taken into account by the discount factor applied to future earnings when calculating shareholder value
a more progressive taxation system
would not result from shift in from direct to indirect taxes
abolition of subsidies given to farmers in EU
would not increase barriers to world trade
shareholder wealth influences share prices but profit does not
is a false statement
supply side economist would recommend in the long term a country’s unemployment problem should be tackled by
income tax cuts to promote labour market incentives
fixed exchange rate relative to non union currencies
is not a feature of an economic union
companies with high levels of borrowing producing consumer durables
would benefit most from an expansionary monetary policy
taxation is not
a method of government borrowing
greater independence in economic policy making is not a consequence of
globalisation for national economies
effective nfp
achieves the goals and objectives set for it
increase in government spending which is not accompanied by an increase in taxation
expansionary monetary policy is not being pursued
private firm
an organisation that is not directly owned by the state
high interest, high power
characteristics f stakeholders most able to influence the management of an organsation
County a and country b both impose tariffs on goods imported from each other. long term effect of imposition of such tariffs
real income would grow at a slower rate in both countries compared to a situation in which there are no tariffs
excess aggregate demand for goods and services
is not a consequence of a country suffering a high rate of inflation
government least likely to reduce taxation in
the boom trade cycle
world trade organisation is concerned with
enforcing the GATT
Increased inflationary pressure
is not a characteristic of a recession
when an economy is in recession, regulation extending employment rights for newly-hired workers
is least likely to reduce unemployment
decreased international specialisation in production is not a
result from increased International mobility of factors of production
business most likely to befit from policy of low interest rate
are those which sell products on credit
in a recession the appropriate policy for a government seeking a recovery would be to
raise public expenditure, reduce taxes and lower interest rates
the existence of a natural rate of unemployment means that
there is no trade-off between inflation and unemployment in the long-run
in a recession the management accountant should consider forecasting
lower sales than in previous years.
result of depreciation in exchange rate for country’s currency
fall in the FX of that country’s exports. rise in production costs fro businesses using imported inputs. worsening in the country’s terms of trades.
rise in interest rate in an economy would not lead to
an increase in business investment
increasing aggregate demand will not affect national income or price level
not consistent with supply side economics
trasnational/ multinational company
production facilities in more than one country
news of better economic outlook in ABC home country
increases the price of shares in ABC plc
falling employment in manufacturing industry resulting from decline in consumer incomes
is not an example of structural unemployment
a rise in the marginal propensity to save
would not lead to the circular flow of national income
business would benefit most from an appreciation in the currency of the country in which it is based if
it imports a high proportion of the raw materials and components it uses
in the boom trade cycle management should anticipate
rise in interest rates
when faced with a recession the appropriate combination of policies for a government in order to generate a recovery is
tax cuts, monetary expansion and a depreciation of the exchange rate
significant fall in personal saving rates
would not cause the onset of a recession
inflation is undesirable except that
inflation shifts wealth from debtors to creditors in an arbitrary fashion
the business sector will be affected by a contraction in the money supply because
consumer credit will contract thus reducing consumer demand
as a result of a period of rapid economic growth, an economy is unlikely to experience
an improving overseas trade balance
If a government adopted an expansionary fiscal policy of cutting direct taxes, the businesses that benefit most would be
those whose products are sold mainly to individual consumers
firm’s banker
not classed as an agent of firm’s shareholder
negative net present value
a project that does not make sufficient returns to fully compensate investors for the funds they invest in
who a tax is imposed upon a commodity which producers must pay to the government, this will cause the commodities
supply curve to shift to the
left
market demand for a good has a price elasticity of demand of 0.4.
total quantity sold will fall as price rises.
rise in demand for petrol by motorists is likely to follow a rise in the price of
public transport
demand for cheese is price elastic. the effect of a rise in demand for cheese
higher price, more sold, rise in revenue of cheese makers
principal agent problem most likely to occur
in large, high tech companies
production of a good is in the public interest if
social benefits are greater than social costs
investor
is not an internal stakeholder
diminishing marginal returns
explains why the average costs of a firm will rise in the shirt run
if production of a good is characterised by significant external social costs, resource allocation can be improved by the government
imposing an indirect tax on the good
different stakeholders have
different objectives
a pure public good is not always
provided by the state or public sector
for a business diseconomies of scale occur when
difficulties in managing a large firm lead to rising long run average costs
economies of scale will not result when a
factory employs 2 shift workers rather than one shift per day
if price of good held above equilibrium price result
a surplus in the market
an advertising campaign directly targeting rival firms
would not be reason for government competition authorise to investigate the businesses involved
main purpose of government competition policy is to
restrict anti-competitive behaviour by the firms
low price elasticity of demand for the product
is not a barrier to entry into an industry
in market economy market mechanism cannot achieve
ensuring a socially fair distribution of goods and services
firm will maximise profits by producing at that level of output where
the difference between total costs and total revenue os the greatest
train company acknowledges that externalities may reduce the welfare of its customers when it provides
reserved seats for disabled passengers
profit per unit is equal
to the difference between average revenue and average total cost
market is equilibrium. if the government imposes a minimum price above the equilibrium price there ill be a
contraction in demand and an extension in supply and market surplus.
reduced transport costs from internet buying is not an eg
of how e-business can benefit a business organisation
the proportion of consumer income spent on good is small
would not make the demand for a good highly price elastic.
when the government intervenes in the market economy to correct market failure
the problem of government failure may result
if when the price of a good increases the total revenue received by the supplier decreases
then the demand for the good must be price elastic
price elasticity of demand is less than 1
does not describe position of profit maximisation
divorce control from ownership
managerial objectives are likely to be related to the size and growth of an organisation rather than shareholder value
when a minimum price is imposed on a good by the government the equilibrium price is where
excess supply will result
When a merit good is consumed
the social benefits exceed the private benefits.
principal agent problem
personal goals are pursued by director that are inconsistent with the welfare of shareholders
if govt on grounds of economic efficiency were to levy a tax on an industry because of the pollution caused by production in the industry the tax should be equal to
the difference between the private and social costs of production
in supply and demand diagram all things being equal an increase in production costs will normally shift
the supply curve to the left
it is not true that trading can only take place at
equilibrium prices in a market economy
MC =0. to maximuse profits
increase download sales to the point where price elasticity of demand =1
product differentiation
will not increase the number of firms in any one industry
government may wish to control horizontal mergers between firms because
such mergers result in increased concentration in industries
in shirt run average variable costs may fall as output rises. this is because
greater efficiency in use of variable resources such as labour
fixed cost
cost that stays constant as output falls
demand for salt gently inelastic. factors that would not contribute to making demand for salt price
supply rises quickly if demand rises because salt is easy
oligopoly market
pricing is conditioned by the expected reaction of rival producers
extensive consumer knowledge of products and prices
would not lead to an industry being dominated bye a small number of firms
what is the impact of a government minimum price established above free market price?
it will increase farm income but may eventually force the government to introduce maximum quotas on production
in the long run a firm may find its average cost of production rising because
of the effect of diseconomies of scale
private goods
can be efficiently allocated between competing uses by price mechanism
RST plc wishes to maximize its profits. At present it is producing where MC is less than MR.
they should not reduce output
A market for a normal good is in equilibrium. What will happen in this market if there was an increase in consumer incomes?
The demand curve would shift to the right, the equilibrium price would rise and there would be an extension in supply
greater opportunities for technological change
is not an eg of economies of scale
