Business Economics Flashcards
1
Q
It is necessary to include a balancing item in the balance of payments accounts in order to
A
compensate for mistakes made when recording current and capital flows.
2
Q
increased entitlement to social security and unemployment benefits
A
is not a supply side policy.
3
Q
A country has a trade deficit. the demand for its imports and exports are price elastic.
A
an improvement in the country’s terms of trade would not lead t a reduction in the country’s trade deficit.
4
Q
outflows of capital
A
does not appear as a credit on the current account of a country’s balance
5
Q
in a fully employed economy a reduction in the rate of income tax
A
would lead to demand pul inflation
6
Q
fiscal policy is a policy
A
which seeks to influence the economy through manipulation of government spending and taxation
7
Q
increased income tax is an eg of
A
an expenditure reducing policy
8
Q
The world bank is responsible for
A
making long term loans to assist developing countries to invest and develop
9
Q
the balance of payments current account moving towards a deficit
A
is not a typical feature of the downing phase of the trade cycle.
10
Q
if an economy went into recession luxury good manufacturers
A
would experience the largest proportionate fall in sales, output and employment.
11
Q
government would not impose a quota on imports to
A
prevent completely the citizens consuming an imported demerit good.
12
Q
maximisation of financial surpluses
A
is not an objective of not for profit organisations
13
Q
social goals towards society
A
is a general characteristic of an organisation.
14
Q
a government might increase its budget deficit in order to reduce
A
demand deficient or cyclical unemployment
15
Q
regressive tax is a tax which
A
rises less than proportionately with income
16
Q
all fall in the level o feet personal debt is not
A
an early indicator from a recession
17
Q
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
a shift to the aggregate demand curve to the left, a fall in output and employment and a fall in the price level
18
Q
management announces that profits will be higher than previously forecast
A
would lead to an increase in a firm’s share price
19
Q
invisible import
A
country’s contribution to foreign aid
20
Q
outflows of capital
A
is not a credit on the current account of a country’s balance of payments accounts.
21
Q
frictional unemployment
A
people moving between jobs
22
Q
as globalisation increases
A
businesses more affected by hinges in exchange rate
23
Q
aggregate supply
A
flow of goods and services produced by an economy during the year
24
Q
IMF provides stabilisation funding to assist developed and developing countries with
A
short term borrowing needs and needs for foreign currency
25
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
26
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
27
improvement in terms of trade is the most likely cause of
demand deficient / cyclical unemployment.
28
improvement in the terms of trade
is the most likely cause of demand deficient / cyclical unemployment.
29
withdrawal exceeding injections is most likely to lead to an economy
suffer high unemployment
30
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
31
a higher exchange rate
is not likely to result from the fall in the rate of interest rate
32
distinction between a free trade area and a customs union is
only a customs union erects a common external tariff
33
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
34
the level of national income in the circular flow will remain constant if
injections are equal to withdrawals
35
manufacturer of industrial machine tools
experience largest fall in demand for its products
36
increase in gdp sustained over a number of years
indicates economic growth taking place
37
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
38
higher international disparities in rates of return on capital
is not a feature of the process of globalisation
39
industry regulator
external stakeholder in a state-owned energy provider
40
charities are not responsible to
their shareholders
41
macroeconomic policy objective
expanding demand to reduce unemployment may mean that the balance of payments worsens
42
an increase in the government spending and firms operating at full capacity
is lily to lead to demand-pull inflation
43
in not for profit organisation money is a constraint and not a goal
money limits how far the organisation can achieve its goals
44
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
45
GNP higher than GDP if
net inflow of factor payments on the balance of payments
46
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
47
increase in business profits
would raise both national and disposable income
48
on an aggregate demand and aggregate supply diagram, cost push inflation is shown by
a leftward shift of shirt-run aggregate supply curve
49
if country joined an economic union its business score would not benefit from
higher profit margins due to a reduction in transport costs
50
supply-side policies re used to improve the the
economy's efficiency and competitiveness
51
market price of company shares
not required in calculating the EPC of company
52
surplus on the current account of balance of payments can be financed by
lending abroad on the capital amount
53
G20 concerned with
| co-oridinating economic oldies and
agreeing banking and financing regulations
54
meeting regulatory, accounting and reporting standards
is not an objective of a profit seeking organisation
55
equilibrium level of national income in an economy is the level of income at which
total planned spending equals the supply of output available
56
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
57
a more progressive taxation system
would not result from shift in from direct to indirect taxes
58
abolition of subsidies given to farmers in EU
would not increase barriers to world trade
59
shareholder wealth influences share prices but profit does not
is a false statement
60
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
61
fixed exchange rate relative to non union currencies
is not a feature of an economic union
62
companies with high levels of borrowing producing consumer durables
would benefit most from an expansionary monetary policy
63
taxation is not
a method of government borrowing
64
greater independence in economic policy making is not a consequence of
globalisation for national economies
65
effective nfp
achieves the goals and objectives set for it
66
increase in government spending which is not accompanied by an increase in taxation
expansionary monetary policy is not being pursued
67
private firm
an organisation that is not directly owned by the state
68
high interest, high power
characteristics f stakeholders most able to influence the management of an organsation
69
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
70
excess aggregate demand for goods and services
is not a consequence of a country suffering a high rate of inflation
71
government least likely to reduce taxation in
the boom trade cycle
72
world trade organisation is concerned with
enforcing the GATT
73
Increased inflationary pressure
is not a characteristic of a recession
74
when an economy is in recession, regulation extending employment rights for newly-hired workers
is least likely to reduce unemployment
75
decreased international specialisation in production is not a
result from increased International mobility of factors of production
76
business most likely to befit from policy of low interest rate
are those which sell products on credit
77
in a recession the appropriate policy for a government seeking a recovery would be to
raise public expenditure, reduce taxes and lower interest rates
78
the existence of a natural rate of unemployment means that
there is no trade-off between inflation and unemployment in the long-run
79
in a recession the management accountant should consider forecasting
lower sales than in previous years.
80
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.
81
rise in interest rate in an economy would not lead to
an increase in business investment
82
increasing aggregate demand will not affect national income or price level
not consistent with supply side economics
83
trasnational/ multinational company
production facilities in more than one country
84
news of better economic outlook in ABC home country
increases the price of shares in ABC plc
85
falling employment in manufacturing industry resulting from decline in consumer incomes
is not an example of structural unemployment
86
a rise in the marginal propensity to save
would not lead to the circular flow of national income
87
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
88
in the boom trade cycle management should anticipate
rise in interest rates
89
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
90
significant fall in personal saving rates
would not cause the onset of a recession
91
inflation is undesirable except that
inflation shifts wealth from debtors to creditors in an arbitrary fashion
92
the business sector will be affected by a contraction in the money supply because
consumer credit will contract thus reducing consumer demand
93
as a result of a period of rapid economic growth, an economy is unlikely to experience
an improving overseas trade balance
94
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
95
firm's banker
not classed as an agent of firm's shareholder
96
negative net present value
a project that does not make sufficient returns to fully compensate investors for the funds they invest in
97
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
98
market demand for a good has a price elasticity of demand of 0.4.
total quantity sold will fall as price rises.
99
rise in demand for petrol by motorists is likely to follow a rise in the price of
public transport
100
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
101
principal agent problem most likely to occur
in large, high tech companies
102
production of a good is in the public interest if
social benefits are greater than social costs
103
investor
is not an internal stakeholder
104
diminishing marginal returns
explains why the average costs of a firm will rise in the shirt run
105
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
106
different stakeholders have
different objectives
107
a pure public good is not always
provided by the state or public sector
108
for a business diseconomies of scale occur when
difficulties in managing a large firm lead to rising long run average costs
109
economies of scale will not result when a
factory employs 2 shift workers rather than one shift per day
110
if price of good held above equilibrium price result
a surplus in the market
111
an advertising campaign directly targeting rival firms
would not be reason for government competition authorise to investigate the businesses involved
112
main purpose of government competition policy is to
restrict anti-competitive behaviour by the firms
113
low price elasticity of demand for the product
is not a barrier to entry into an industry
114
in market economy market mechanism cannot achieve
ensuring a socially fair distribution of goods and services
115
firm will maximise profits by producing at that level of output where
the difference between total costs and total revenue os the greatest
116
train company acknowledges that externalities may reduce the welfare of its customers when it provides
reserved seats for disabled passengers
117
profit per unit is equal
to the difference between average revenue and average total cost
118
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.
119
reduced transport costs from internet buying is not an eg
of how e-business can benefit a business organisation
120
the proportion of consumer income spent on good is small
would not make the demand for a good highly price elastic.
121
when the government intervenes in the market economy to correct market failure
the problem of government failure may result
122
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
123
price elasticity of demand is less than 1
does not describe position of profit maximisation
124
divorce control from ownership
managerial objectives are likely to be related to the size and growth of an organisation rather than shareholder value
125
when a minimum price is imposed on a good by the government the equilibrium price is where
excess supply will result
126
When a merit good is consumed
the social benefits exceed the private benefits.
127
principal agent problem
personal goals are pursued by director that are inconsistent with the welfare of shareholders
128
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
129
in supply and demand diagram all things being equal an increase in production costs will normally shift
the supply curve to the left
130
it is not true that trading can only take place at
equilibrium prices in a market economy
131
MC =0. to maximuse profits
increase download sales to the point where price elasticity of demand =1
132
product differentiation
will not increase the number of firms in any one industry
133
government may wish to control horizontal mergers between firms because
such mergers result in increased concentration in industries
134
in shirt run average variable costs may fall as output rises. this is because
greater efficiency in use of variable resources such as labour
135
fixed cost
cost that stays constant as output falls
136
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
137
oligopoly market
pricing is conditioned by the expected reaction of rival producers
138
extensive consumer knowledge of products and prices
would not lead to an industry being dominated bye a small number of firms
139
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
140
in the long run a firm may find its average cost of production rising because
of the effect of diseconomies of scale
141
private goods
can be efficiently allocated between competing uses by price mechanism
142
RST plc wishes to maximize its profits. At present it is producing where MC is less than MR.
they should not reduce output
143
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
144
greater opportunities for technological change
is not an eg of economies of scale
145
the average price of recorded music cd has been declining for several year.
decline in number of CD shops due to bankruptcy and closure
146
firms can join the industry easily
would make the market supply of a product price elastic
147
agriculture
has the largest number of businesses operating within them
148
In 201X the market for a crop suffered high prices. According to cobweb theory
Price will fall because the high price in 201X gave an incentive to farmers to plant more and flood the market with extra supply
149
XYZ plc has relocated its head office to a new site which enjoys better road communications and is close to a training college that teaches the skills needed to work at XYZ plc. costs will fall because
it will gain the benefits of external economies of scale
150
If a firm wishes to maximize market share without incurring a loss,
it should set its price where Total cost equals total revenue
151
The publication of a health report urging people to eat white rather than red meats
cause the demand curve for chicken meat to shift to the right
152
A car manufacturer investing in a chain of car showrooms and dealers
eg of forward vertical integration
153
Price elastic demand, price inelastic supply
will lead to greater stability (or convergence) of prices in the Cobweb model (or Cobweb theorem)
154
If a manufacturing firm contributes to global warming as a byproduct of its production process, this is an example of
An external social cost
155
XYZ loses money following a risky investment in a new line of business
NOT a symptom of the principal-agent problem in company XYZ
156
Porter describes differentiation as a firm having a unique product or service that is valued by the customer.Higher costs of production and marketing necessitating the charging of a higher price is
NOT a factor in the higher prices and profits from differentiated products
157
If in the short run a business raises the output of its product then
average total cost will initially fall and then rise as output is increased
158
Large shifts in demand combined with supply that is price inelastic
would lead to instability over time in the incomes of producers of primary products
159
corporate governance
The systems by which organizations are directed and controlled
160
In a market economy, prices do not act
as a substitute for barter
161
it is incorrect that
small firms are common in industries where there are niche markets
162
Informative advertising giving way to persuasive advertising
is most likely to increase rather than to reduce market imperfections
163
To secure sources of supply
is not a motive for a horizontal merger
164
A profit-maximizing firm will cut the product's price to increase profits if
Marginal revenue is greater than marginal cost
165
examples of long run internal economies of scale
Mass production using robot machine tool technology
Obtaining lower prices when buying raw materials in bulk
Lower borrowing costs for large firms
166
A business is selling a good with a price inelastic demand. If it decreases the supply of the good the result will be:
the market price will rise, demand will contract and total revenue will rise
167
Merit goods are typically characterized by
external social benefits in consumption
168
public characterised by
the free rider problem
169
the industry is a natural monopoly
is not an argument for privatising a public sect industry
170
what is the impact of a government price floor (minimum price) set below free market price
It will not affect market price or producer incomes at the present time
171
Whenever demand for a good is price elastic, an increase in price will
Decrease total consumer expenditure on the good
172
Supply decisions are based on the prices of the present time period
do not contribute to the instability of agricultural prices
173
MNO is considering moving production to a developing country.
The move will increase the length of MNO's supply chains
and not reduce its production costs
174
Firms in competitive markets can earn only normal profit in the long run because
there are no barriers to entry into these markets
175
If a firm increases employment of all its factors of production by 50% and as a result output increases by 60%, it has experienced
Increasing returns to scale
176
There are waiting lists and shortages of a product. this is because
A price ceiling (maximum price) has been set below free market price
177
If the government imposed a legal minimum wage that was above the market equilibrium wage, the resulting unemployment would be the greatest when:
the demand for labor and the supply of labor are both price elastic
It is available at zero cost of production in unlimited quantities
178
A successful advertising campaign by butter producers
is likely to cause the demand curve of margarine to shift to the left
179
The 'satisfying' model of business behavior states that business will aim to:
attempt to meet the differing demands of various stakeholders
180
globalisation will not result in
decreased intentional transportation and communication costs
181
Some consumers being unable to afford goods because prices have been driven up by the demand from other consumers
is not an example of externalities
182
Why do monopoly market structures charge higher prices than would be charged by more competitive market structures?
They can increase profits by reducing output to force prices higher
183
Total economic welfare derived from an activity will be maximized if the activity is undertaken up to the point at which
Marginal social benefit equals marginal social cost
184
A shift in the supply curve for a good will have the biggest effect on the market price when the demand curve for the good
is highly price inelastic
185
role of agent in principal agent theory
One who is responsible for ensuring the organization pursues the interests of its owners
186
A typical supply curve of a good shows:
The quantities of the good firms are prepared to supply at different possible prices
187
Firms may suffer from X-inefficiency because of organizational slack.
The number of rival firms increases wold not lead to organisational slack
188
Market demand is price inelastic
is essential if producer incomes are to rise following the imposition of a price floor (minimum price) in a market
189
The price changed a short while ago
would tend to make the demand for a product price inelastic
190
Government
Trade Unions
Pressure groups
external stakeholders for an organization
191
it is untrue that a firms's total revenue curve
would be horizontal straight line if demand for the product were perfectly price elastic
192
Which of the following is not a reason for a firm to issue bonds rather than ordinary shares
to raise additional finance?
Lower risk because bond holders cannot liquidate a firm for non-payment of interest whereas shareholders can
193
it will never be traded on an investment market
does not distinguish redeemable debt from equity
194
treasury bills
not issued fro long term borrowing by the issuer
195
when central banks adopt quantitative easing
they buy government bond from the banks
196
benefit of single currency
It is easier to compare prices of consumer goods in all countries using the Euro A reduction in transactions costs for trade between countries using the Euro. Increased economic growth resulting from a more efficient common market
197
the conduct of fiscal policy
is not a function of central bank
198
allocation of adequate resources for future investment
is to achieved by the price mechanism in a market economy
199
maturity transformation
converts a flow of short-term deposits into a supply of long term loans
200
stock market
does not fulfil a market for short erm loans
201
Real GDP per capita in an economy is directly affected by
The quantity of resources located in the economy
| How efficiently the economy uses resources when producing goods and services The size of the working population
202
central banks do not seek to influence the reserves of commercial banks
to regulate the profits of commercial banks
203
financial intermediation
net savers and net borrowers are brought together
204
certificate of deposit
is not a source of finance for business
205
in a system of freely floating exchange rates the central bank and government will
not need to engage in exchange equalisation
206
transfer of payments
is not a financial intermediary function
207
Regulatory offices have been established after the privatization of some nationalized industries because
some industries retain significant monopoly power
208
Over- capitalization of commercial and investment banks
were not contributory causes of the banking crisis of 2008
209
If real rates of interest are positive and rising, then
The desire to hold cash balances will be increasing
210
corporate governance
the system by which companies are directed and controlled
211
All the costs are fixed and there are no variable costs associated with the number of spectators attending.
it is false that the profit maximising price will ensure the promoter covers the costs of the concert.
212
world bank
Helping countries overcome the lack of synchronization between payments and receipts over the long run
213
They encourage international trade by eliminating foreign exchange transactions costs
not an advantage of a system of floating (flexible) exchange rates.
214
regulation of the taxation system
is not a function of central bank
215
spot rates
price for the currency that is to be delivered immediately
216
Risk management
'Invests across a wide range of assets to reduce the loss of capital value if a particular borrower defaults
217
A sharp fall in rate of interest on inter-bank lending
was not a feature of 2008 crisis
218
The sale of:
| Treasury bills to the banking sector
inflationary method of government borrowing
219
A government can finance a budget deficit by:
including taxation rates.
selling long term government bonds.
issuing treasury bills.
220
determination and conduct of fiscal policy
is not a function of central banks
221
aggregation
bundles of small deposits of liquidity into larger loans
222
policy instrument interest rate cut.
policy objective faster economic growth.
223
certificates of deposit
not a suitable way for a manufacturing company to finance buying assets
224
diseconomies of scale
cause the long run average cost curve to rise
225
ordinary shares
most appropriate fro a growing company to use which wishes to borrow funds long-term to pay for initial marketing research and promotion
226
a business cannot meet short term financial needs by
issuing shares
227
A fall in interest rates in that country
would lead to a fall (depreciation) in the exchange rate for a country's currency
228
Global Banking Crisis of 2007 followed by a credit crunch of low lending
Banks had lost reserves and could not support high lending
229
not for profit are
not partnerships
230
certificates of deposit
are not traded on the long term capital market
231
interest rates
reduce the net present value of a proposed investment project
232
eurobond
bond denominated in currency that differs from the domestic currency of the country where the bond was issued
233
financial intermediation
linking of net savers with net borrowers
234
Subsidies to the producers
are not appropriate policies to deal with the problem of industries that cause pollution
235
existence of structure of interest rates
Borrowers having different risk profiles
Lenders wishing to lend for different time profiles
The existence of margins between borrowing and lending rates
236
According to the purchasing power parity theory, if a country's inflation rate is 5% higher than the inflation rates of the country's competitors in the world economy
The country's exchange rate will fall by 5% to restore the terms of trade
237
Dividends
not a source of long-term capita for a company
238
The real rate of interest is
The nominal rate of interest adjusted for inflation.
239
An increase in rates of interest within the country
most likely to lead to a rise in the exchange rate of country's currency and a fall in the price of stocks shares
240
Medium term borrowing eg
govt borrow funds to increase govt expenditure on job creation schemes. then repay borrowed funds during boom phase.
241
Balance of payments adjustment occurs without any effect on the domestic economy
is not true under a system of floating/flexible exchange rates
242
Progressive income taxes
Unemployment benefits
Means-tested welfare benefits
known as automatic stabilizers because they tend to reduce the fluctuations in economic activity associated with the business cycle
243
known as automatic stabilizers because they tend to reduce the fluctuations in economic activity associated with the business cycle?
Progressive income taxes
would encourage a speculative short-term capital flow into a country's currency
244
commercial banks
issue certificates of deposit
245
Medium term borrowing
a household allows its bank account to become overdrawn for 3 months to pay for its annual holiday.
246
Higher capital adequacy ratios for commercial banks
have been recommended in order to prevent a repeat of the 2008 financial crisis
247
Following a 10% reduction in the value of its currency, the volume of imports into the country falls by 10%, whilst the volume of exports rises by 15%.
Balance of payments will improve
248
The need for working capital in small businesses
is NOT an example of a long term financial need
249
in the short run the following would result from a depreciation of the country's exchange rate
Increased competitiveness of the country's exports
A worsening of the country's terms of trade
Increased energy and raw material costs for the country's manufacturing firms
250
The ability of commercial banks to create credit would be reduced if:
the required cash ratio was raised
251
The yield of government bonds
is likely to increase as a result of the sale by the central bank of a large quantity of government bonds
252
If a central bank adopted an expansionary monetary policy the effects would include
A. rise in bond prices
253
If a country were to join a currency union (for example, the European single currency, the Euro), its businesses would not experience
Reduced price transparency.
254
High monetary inflation
NOT a consequence of the Global Banking Crisis that began in 2007
255
A lender of last resort to the banking system
not a function performed by investment exchanges such as NASDAQ, the London Stock Exchange or the New York Stock Exchange?
256
mezzanine finance'
Finance that is neither pure debt nor pure equity
257
Whenever a government provides health care services free of charge
Provision of merit goods by the state is taking place
258
The burden of an indirect tax on a good will fall most heavily on the producer when
the demand for the good is price elastic and the supply is price inelastic
259
Basel 3
regulates banking
260
central banks are not
chief advisor to the government on taxation policy
261
The incentive for two countries to trade with each other would be reduced or removed by
transport costs between the two countries exceeding the output gain from trade
the industries in both countries suffering from significant decreasing returns to scale
262
The central bank can increase liquidity in the banking system, by:
buying government bonds and lowering interest rates
263
If a group of countries have adopted:
(i). Free trade in goods and services between member states, (ii). Free movement of capital and labor between member states, (iii). A common external tariff policy,
This would be an example of a(n)
common (or single) market
264
National Debt
The accumulated borrowings by the government in previous years that have not yet been repaid
265
The International Monetary Fund
Lending to member states that are experiencing serious balance of payments problems
266
behavioural theory
'The decisions of management are the result of a political maneuvering of the various stakeholders connected to the organization.'
267
central bank is
lender of the last resort to the banking system. eg 2007 global banking crises many central banks undertook quantitative easing through purchasing bonds back from banks with new money
268
Which of the following might justify a policy of privatization by the government?
Privatization inevitably reduces monopoly power and exploitation in the economy Privatization may be expected to increase the efficiency and competitiveness of the economy Revenue raised from privatization can reduce the public sector borrowing requirement Privatization helps to promote an enterprise culture amongst the population
269
The Global Banking Crisis showed that banks had failed in all of the following ways except
Generate adequate profitability
270
A government may try to reduce a balance of payments deficit on current account by using either expenditure-reducing policies or expenditure-switching policies.
Higher income tax rates is an expenditure-reducing policy
271
euro currency market
The market for bank deposits denominated in a currency other than that of the country where the bank is located.
272
Economic recession and the credit crunch
was NOT a contributor to the Global Banking Crisis after 2007
273
That country's invisible earnings
| A country's currency depreciates (falls) on the foreign exchange market.
Businesses would not lose income from each export as their export prices would fall.
274
country's invisible earnings
is not a source of demand for a country's currency in the fx market
275
The national debt
the total accumulated amount the state owes to lenders in its own country and internationally
276
The International Monetary Fund uses the funds at its disposal to
Help member countries with temporary balance of payments deficits
277
Aggregation
eg
A financial intermediary takes the small deposits of millions of savers and uses them to buy an issue of government (treasury) bills and bonds
278
The government requiring that seat belts are fitted in all coaches and regularly tested
is an example of regulation as a form of government intervention in the economy
279
A good has a price elasticity of supply of 0.8. Which of the following best describes the effects of a rise in demand for this good?
More will be spent on the good
More of the good will be made and sold
Producer incomes will rise
Price rises more than proportionately to the rise in quantity produced
280
A government receives some direct tax once a year and many firms pay over the indirect
tax they owe quarterly. However, payments to government employees are made at the
same rate every month.
Which asset does a government use to overcome this lack of synchronization between payments and receipts?
Treasury bills
281
central banks do not
finance the government budget deficit
282
If central bankers wished to agree and implement new measures to assure the security of global banks
they would use the G20
283
Government debt is not traded exclusively
by the central banks
284
Maturity transformation
Lenders normally wish to offer their funds for the short term, but most borrowers prefer to borrow over the long term. Resolving this mismatch
285
investment exchanges
are not classed as non-bank financial intermediary
286
regressive tax
proportion of income paid in tax rises as income falls
287
if price of cheap teddy bears rise demand would
fall as consumers would look for other teddy bears to buy
288
use a wholesale bank
profit of £100,000
| internatonal operation
289
public health campaign sources for effect on sales
news media. online surveys for customers.
290
A business has a contractual requirement to pay a sum of$6m in a foreign currency in 12 months time. It takes out a forward exchange contract from this sum.
hedging
291
customs union.
A trade agreement that removes all import tariffs between member countries, sets up common external tariffs against non-members, but does not advance toward economic integration
292
Which THREE of the following businesses are more likely to fare belter during a recession?
A producer of rice, a staple good
A producer of security equipment, a counter-cyclical good
A retailer specialising in fashion, a cyclical good
293
Which of the following could potentially be goals set out by the Lingford Miracle Association given the information about the organisation that has been outlined?
To provide care for those who are terminally ill
294
Other things being equal, an increase in a country's balance of payments deficit on current account means that
Aggregate demand is falling
295
A railway franchise in north-eastern Messu Potami has recently changed hands, and is now being operated by the company IstClass. However, IstClass already operate the railway franchise in northwestern Messu Potami. Which of the following courses of action would be most appropriate for the government of Messu Potami to take?
Establish a regulatory body to prevent a regional monopoly
Rerun the franchise bidding process if it found that IstClass are imposing additional price rises
due to the regional monopoly
296
The British Government has decided to invest £10m in the Department of Education to build new schools in the most deprived areas of the country.
In what way does this benefit the British economy?
It is a supply-side policy which will lead to a more productive workforce in the future
297
'The £ has risen against other currencies since August, defying forecasters who thought that the UK's widening trade deficit must cause the £'s exchange rate to fall.'
From the above information, it can be concluded that, since August
The strengthening pound has improved the UK balance of payments on current account
298
West Morton Rail has calculated that the number of passengers travelling on their railway increases during school holidays, while the inverse is true for most other railways in the country. Which of the following is the most likely reason for this unusual correlation?
West Morton Rail is a heritage railway, meaning it will receive more passengers as rates of tourism increase during the school holidays
299
Governments provide public goods, such as street lighting, because
it would be an unprofitable activity for private business because of the free-rider problem
300
PlusTech is a video games company with staff based in Los Angeles, California, London, UK, and Berlin, Germany. PlusTech currently employs 20 people to develop and market its games, while the distribution is handled by RPGInternational, a separate company.
Why should PlusTech adopt multiple business structures in order to succeed in the video games industry?
The videogames industry is international, therefore the company should adopt the model of a virtual organisation
The small number of staff the company has means it has to form a strategic alliance with RPGInternational in order to distribute its games
301
Of the following, which stakeholder would be most likely to protest against the construction of the new Golden Crisp Cereals factory?
Environmental groups
302
VapNat, an e-cigarette store, has experienced a steep decline in sales over the past six months, despite the economy in general performing well.
Social factors Technological factors Legal factors
303
in relation to the airline'?
If each pair of data points is plotted on a graph with Y on the vertical axis and X on the horizontal axis, there will be a downward sloping line.
304
Company X is a wholesaler. It sells the majority of its products in bulk to a small number of restaurants and cafes in the local area.
A reduction in distribution costs as a result of economies of scale
A reduction in the number of staff needed to perform certain roles within the company Beth wants to take out an annuity in order to be able to leave more money to her children when she passes away. She has looked at three annuities with different payout rates.
305
In order to maximise shareholder wealth, the primary objective of a business can be reflected in
higher share prices
| higher dividend payments.
306
automatic stabilizer
any factor that
| Operates to reduce cyclical fluctuations in output without active government policy.
307
Jacob's Tobacconists have recently been hit by the increase in tax on tobacco products in the UK. The graph shows the drop in demand after the tax was applied to these products.
What might the amount denoted by the difference between PO and P1 on the graph be used for?
To fund public health services in the UK
308
The share price of Quench Drinks has been steadily falling for several years despite steady sales and a slight market share increase over the last 5 years. They have been criticised for being full of sugar and not capitalising on the health food trend.
Quench are starting to face pressure from their shareholders to push the share price back up. Which of the following would be most likely to improve Quench's standing in the soft drinks market?
Release a new protein shake, QuenchFit
| Publishing an advert in a major magazine promoting QuenchFit and the benefits of healthy living
309
Vencia has recently been faced with international condemnation due to its tendency to engage in 'dirty floating'. This is combined with high interest rates as well as underdeveloped industries. What would likely be the result of these conditions on Vencia's trade?
A lack of investment from businesses in the long-term
| Some investment in the short-term due to high interest rates
310
The time period considered.
will NOT affect the price elasticity of supply
311
iphone's monopoly in the industry allows for better research and development,
leading to better and more frequent technological advances
312
The interest rate at TrowBank is currently running at 7%. The number of customers borrowing to invest has fallen drastically.
Which of the following explains why this is the case?
The high interest rate means that it is more expensive to borrow to invest
Many customers have decided to save rather than invest due to the high interest rate
313
The government of Vencia has set out in its Budget a restrictive set of fiscal policies. These include raising VAT and the basic rate of income tax to 25%. The Bank of Vencia must now implement this Budget as monetary policy. Which of the following best outlines how the Bank of Vencia might do this?
Halt all ongoing quantitative easing programmes, buy bonds at a higher interest rate and sell treasury bills
314
Government X has just increased taxes in order to limit spending and hence demand. Which of the following is most likely to have been the cause of this fiscal policy?
An inflationary gap, where demand outstrips output
315
candle sticks have a price elasticity of minus 1.2
Produce more candlesticks
316
The government has set a maximum house price due to a massive house price rise in the
last decade. This is denoted by the line Q1Q2 on the graph.
Which of the following may occur in light of the introduction of the maximum house price as it appears on the graph?
There will be a shortage of housing supply in Lingford.
| A 'black market' may develop in housing, meaning the maximum price is ignored.
317
The Competition and Markets Authority is a regulatory body in the UK. In 2017, the CMA found the proposed merger of Heineken and Punch Pubs in breach of its competition laws. Heineken and Punch Pubs have agreed to divest in pubs in areas where they are the two dominant pub companies. Which of the following are ways in which consumers might directly benefit from this decision?
Heineken/Punch Pubs will not be able to charge excessive prices for alcoholic beverages served at their pubs
There will be a greater variety of pubs for consumers to choose from in certain areas
318
The bank offering cheap loans to large companies
internal economy of scale
319
To satisfy the needs of a particular sector of society
primary objective of a not-for-profit organisation
320
Country X is a country highly reliant on its oil exports. However, in recent months, oil prices have fallen by 20%. It is located near Country Y, an oil exporter which is a member of a trading bloc. Country X has some coal reserves, but faces stiff competition from Country Z, a member of the trading bloc, which also exports coal. Which of the following would be the most effective way for the government to alleviate these circumstances?
Purchase oil produced within the country in order to support the domestic oil industry
Invest in retraining those working in the oil industry so they can enter other domestic industries which are currently more profitable
321
RubTech has decided to build a new rubber production facility just outside the semi-rural town of Pettisbury. The majority of workers at the plant are to be sourced from abroad. Which of the following could potentially be negative externalities of the decision to build the production facility?
Production processes
Rood congestion
The decision to source workers from abroad
322
The country Messu Potami is a key exporter of steel. However, its prominence as a steel exporter is partially due to its manipulating of exchange rates by buying large amounts of other countries' currencies. How best can neighbouring countries prevent the cheap exports produced by Messu Potami from affecting their own domestic markets?
Impose a fixed tariff on imports coming from Messu Potami
323
Golden Crisp Cereals has calculated that its demand price elasticity is -1.4. It wants to expand in order to produce more cereal and hence increase its sales.
Which of the following are ways in which Golden Crisp Cereals could expand in the short run?
Lease cereal-producing equipment at a fixed price for the next six months
Lease a small factory at a fixed price in order to increase production capacity
324
What degree of correlation is there between productivity and happiness at Brilliant Buys, using Spearman's coefficient?
Low correlation
325
The component bar chart displaying sales revenues for different types of product sold by Pills Pharmaceuticals shows that the poorest performing products are its medical devices.
Which of the following may be reasons for this?
The company does not specialise in selling medical devices to hospitals
The company has only recently started to develop and sell medical devices and equipment
326
Company X's government has seen the the balance of payments deficit steadily rising while they have been in power.
Which of the following would be a good policy to implement to counteract this?
Decrease the interest rates across the whole economy to limit foreign investment
327
Which of the below are the most significant reasons why the pie chart is an inappropriate way of expressing this data?
It cannot be used to develop sales strategies moving forward
It does not give specific details as to which items sold in store are experiencing poor sales
328
Quantitative easing, the purchase of government or private securities by the central banks from investors, is an example of
contractionary fiscal policy.
329
Atu, a new social media platform, has launched an advertising campaign directed at areas of Country X where there is a higher proportion of young people than elsewhere.
Which source is most likely to have been used by Atu to acquire this data?
Demographic statistics published in a census
330
Betsy's Fish Foods Pic. has issued shares in a prospectus.
| Which of the following are benefits of selling shares in this manner?
It allows companies to open up its investor base
| It allows more investors to receive profits in the form of dividends from the company
331
Opening a new office could lead to
delays in messages being communicated between different departments
332
Company X's government has a fiscal surplus. However, this has led to less investment in Company X's economy and an increased rate of unemployment.
Which of the following best describes how a fiscal surplus might be achieved, and why it may be necessary for a government to achieve one?
When taxation exceeds public expenditure, and in order to limit inflation
333
A widening of price differentials between countries
will not result from the process of globalization
334
Peter holds his current and savings accounts with Western Mutual.
Which of the following is a benefit that Peter should expect to enjoy from possessing accounts with Western Mutual?
As a mutual organisation, Western Mutual will prioritise Peter's welfare over profits to be made
335
Brine Bank is facing a liquidity crisis.
| Which of the following should the central bank NOT do in response to this?
Sell government bonds to decrease interest rates, encouraging borrowing from the bank's customers
Lower the capital adequacy ratio
336
jerry has just been appointed the director of Foodgo Pic, an international supermarket chain. He outlines his main priorities to his staff, which are as follows:
1: To increase sales from £23bn per year to £30bn per year within the next five years.
2: To increase the number of items stocked in Foodgo stores to attract more customers.
3: To prioritise sales figures over profits, which have been stagnant for five years.
337
Which of the following best describes why shareholders may be unhappy with jerry's approach to the business?
A focus on sales rather than profits would mean shareholder dividends may decrease
338
Bishops Financial Services has outsourced its HR Department to Resources4U.
Which of the following is most likely to be considered when deciding to outsource parts of the business to another company?
Resources4U's lack of business history
339
DigiRecords is an international retailer of CDs and DVDs. It has, however, started selling BluRoy players and discs.
Which of the following may have had an impact on DigiRecords' decision to begin selling BluRay players and discs?
The increase in demand for BluRay and the subsequent decrease in demand for DVDs
340
Which of the following are reasons why the principal-agent problem is so critical for businesses?
It limits the control of one layer of management over another
It can lead to dubious managerial practices within the company
341
The managing director of Polly's, a department store, has found that ten of its stores located in the south east of England have seen a significant fall in profit margin.
Which of the following is most likely to be the cause of this?
An increase in rent for the premises in which the store is located
342
PetsPlus Pic. has outsourced its marketing operations to the recently established marketing firm MarketMe. MarketMe has devised and distributed an online survey on behalf of PetsPlus Pic, asking customers to evaluate the products they purchase from the company. An example of a question from the survey is as follows:
'What do you think of PetsPlus's decision to outsource its marketing operations to a marketing firm? Which of the following best describes why this question will not yield good information for PetsPlus?
Relevance
343
A clothes retailer has estimated a linear trend equation including trend, seasonal and cyclical components to forecast its sales for the next four quarters Which of the following factors would generate actual sales figures that are likely to differ markedly from the forecast?
An increase in sales before a major religious festival
344
TrowPlan Ltd. is planning on growing their business through expanding their real estate holdings. In order to do this, they have taken out a bank loan of £2 million. This loan is to be repaid by TrowPlan Ltd. over a period of 14 years with an interest rate of 10%. However, there are rumours of recession in the banking sector, and the economic uncertainty caused by Britain's vote to leave the EU continues to decrease the value of pound sterling. In these circumstances, which of these options would be the least suitable course of action for TrowPlan Ltd. to take?
Take out the loan without any guarantee or security so as to see whether interest rates lower in the near future
Take out an interest rate guarantee and wait until the economic situation becomes clearer before taking out a Forward Rate Agreement
345
A bottle of brandy costs £25 in Country X, including both unit tax and ad valorem tax. These taxes are applied throughout the production process.
Which of the following applies to this particular scenario?
The ad valorem tax acts as a sales tax
| Both taxes can be classed as multi-stage consumption taxes
346
Which of the following is an example of fiscal policy?
The creation of tax-exempt savings accounts to encourage savings
347
Larger companies may benefit from economies of scale due to which THREE of the following?
Larger companies may more easily access public subsidies
Larger companies may obtain lower interest rates on their loans.
Larger companies may purchase inputs in bulk at lower unit prices
348
Which TWO of the following policy actions might be available to a government that wishes to reduce a deficit in the balance of payments?
Devaluate the exchange rate in order to increase exports.
| Reduce the interest rate in order to stimulate investment.
349
If the production of a good involves an external social cost, resource allocation could be improved by:
imposing an indirect tax on the good
350
If a central bank wished to increase the supply of money and credit in the economy it would:
buy bonds and reduce interest rates
351
In the short term, if an organisation's income is lower than its expenditure, it is an example of:
lack of financial synchronisation
352
equity financing
A company investing its excess liquidity by purchasing shares.
353
Which of the following is an example of reflationary monetary policy?
Lowering interest rates in order to boost the economy during a recession.
354
Which THREE of the following constitute injections into the circular flow of income?
Savings
Imports
Taxation
355
Which of the following is the most likely policy response to an economic recession?
Raise aggregate demand by lowering interest rates, reducing taxation and raising public expenditure
356
Pills Pharmaceuticals has founded a new department which focuses on big data analysis. The organisation plans to perform this analysis using data collected by two subsidiaries, one based in London and the other in San Francisco.
Which of Gartner's 'Three Vs' is applicable to this scenario?
Variety
357
An investor has bought a financial asset that pays a variable interest rate at the end of a three- year period At the same time, the invest forward rate agreement (FRA) on an agreed forward rate of 3% at the asset's maturity. What is the advantage of the FRA?
If the market interest rate at the asset's maturity is lower than 3%. the bank will pay the investor for the difference in rates
358
A business has a short-term problem with its payments exceeding its receipts. Which TWO of the following would be appropriate for meeting this financial shortfall?
A bank overdraft
| Issuing shares
359
For a typical business, which of the following is NOT a potential benefit of globalisation?
Simultaneously improved terms of trade for all countries
360
Which of the following is a feature of nol-for-profit organisations (NFPs)?
Which of the following is a feature of nol-for-profit organisations (NFPs)? Their objectives can vary greatly
361
Which THREE of the following are characteristics of good information?
Accuracy
Trustworthiness
Relevance
