Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business Environment > ECON > Flashcards

ECON Flashcards

1
Q

The primary purpose of the consumer price index (CPI) is to

A

Compare relative price changes overtime.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

The law of diminishing marginal utility states that

A

Marginal utility will decline as a consumer acquires additional units of a specific product.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Which of the following Federal Reserve policies would increase money supply?

a. Change the multiplier effect.
b. Reduce the discount rate.
c. Increase reserve requirements.
d. Sell more US Treasury bonds.

A

Reduce the discount rate.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Freely fluctuating exchange rates perform which of the following functions?

a. They automatically correct a lack of equilibrium in the balance of payments.
b. They make imports cheaper and exports more expensive.
c. They impose constraints on the domestic economy.
d. They eliminate the need for foreign currency hedging.

A

They automatically correct a lack of equilibrium in the balance of payments.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

When analyzing a country’s balance of payments accounts, the

a. Country will be in financial jeopardy unless each component in the balance of payments accounts balances at the end of the year.
b. “Capital account” refers to the transactions related to the international movement of financial capital.
c. “Current account” and “trade balances are the same.
d. “Current account” refers only to merchandise exports and imports.

A

“Capital account” refers to the transactions related to the international movement of financial capital.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

An increase in the market supply of beef would result in a(n)

A

Increase in the quantity of beef demanded.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

The rate of unemployment caused by changes in the composition of employment opportunities over time is referred to as the

A

Structural unemployment rate.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

A lender and a borrower signed a contract for a $1,000 loan for one year. The lender asked the borrower to pay 3% interest. Inflation occurred and prices rose by
2% over the next year. The borrower repaid $1,030. What is the amount worth in real terms, after inflation?

A

$1,009.80

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

X and Y are complementary products. If the price of product Y increases, the immediate impact on product X is that its

A

Quantity demanded will decrease.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Marginal revenue is

A

The change in total revenue associated with producing and selling one more unit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

A city ordinance that freezes rent prices may cause

A

Demand for rental space to exceed supply.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Which one of the following is not a key assumption of perfect competition?

a. The level of a firm’s output is small relative to the industry’s total output.
b. Each firm can price its product above the industry price.
c. Firms sell a homogeneous product.
d. Customers re indifferent doubt which firm they buy from.

A

Each firm can price its product above the industry price.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

The trough of a business cycle is generally characterized by

A

Unused productive capacity and an unwillingness to risk new investments.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

If a group of consumers decide to boycott a particular product, the expected result would be

A

A decrease in the demand for the product.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

When maximizing utility in economics, what is being maximized?

A

Satisfaction.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Which of the following factors is inherent in a firm’s operations if it utilizes only equity financing?

a. Interest rate risk.
b. Marginal risk.
c. Business risk.
d. Financial risk.

A

Business risk.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

A supply curve illustrates the relationship between

A

Price and quantity supplied.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Which of the following individuals would be most hurt by an unanticipated increase in inflation?

a. A borrower whose debt has a fixed interest rate.
b. A union worker whose contract includes a provision for regular cost-of-living adjustments.
c. A retiree living on a fixed income.
d. A saver whose savings was placed in a variable-rate savings account.

A

A retiree living on a fixed income.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

A company has a foreign-currency-dominated trade payable, due in 60 days. In order to eliminate the foreign exchange risk associated with the payable, the
company could

A

Buy foreign currency forward today.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Which competition form describes an industry that has a relatively large number of firms operating noncollusively and producing differentiated products?

a. Pure monopoly.
b. Pure competition.
c. Monopolistic competition.
d. Oligopoly.

A

Monopolistic competition.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

In the long run, a firm may experience increasing returns due to

A

Economies of scale.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Assuming that the real rate of interest is the same in both countries, if country A has a higher nominal interest rate than country B, then the currency of country A will
likely be selling at a

A

Forward discount relative to the currency of country B.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Which of the following is a direct effect of imposing a protective tariff on an imported product?

a. Reduced domestic production of the item.
b. Lower domestic prices on the imported item.
c. Higher sales revenues for foreign producers of the item.
d. Lower domestic consumption of the item.

A

Lower domestic consumption of the item.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

The movement along the demand curve from one price-quantity combination to another is called a(n)

A

Change in the quantity demanded.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

If a government were to use only fiscal policy to stimulate the economy from a recession, it would

A

Lower consumer taxes and increase government spending.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Which of the following is an assumption in a perfectly competitive financial market?

a. Some traders can impact market prices more than others.
b. Information about borrowing/lending activities is only available to those willing to pay market prices.
c. No single trader or traders can have a significant impact on market prices.
d. Trading prices vary based on supply only.

A

No single trader or traders can have a significant impact on market prices.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is the effect when a foreign competitor’s currency becomes weaker compared to the US dollar?

A

The foreign company will have an advantage in the US market.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Tower Inc. sells a product that is a close substitute for a product offered by Westco. Historically, management of Tower has observed a coefficient of cross-elasticity
of 1.5 between the two products. If management of Tower anticipates a 5% increase in price by Westco, how would this action by Westco’s management be expected
to affect the demand for Tower’s product?

A

A 7.5% increase.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

The producer price index measures

A

The price of a basket of commodities at the point of the first commercial sale.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Which of the following strategies would the Federal Reserve most likely pursue under an expansionary policy?

a. Raise the reserve requirement and raise the discount rate.
b. Reduce the reserve requirement while raising the discount rate.
c. Raise the reserve requirement and lower the discount rate.
d. Purchase federal securities and lower the discount rate.

A

Purchase federal securities and lower the discount rate.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Assume that the United States Congress passes a tax law that provides for a “rebate” to taxpayers. One of the goals of the rebate is

A

Increase consumer disposable income and expand the economy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Which of the following segments of the economy will be least affected by the business cycle?

a. Machinery and equipment industry.
b. Residential construction industry.
c. Health care industry.
d. Commercial construction industry.

A

Health care industry.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

The formula for calculating a price index for the year 2013, using the year 2008 as a reference period is

A

(Price of 2013 market basket in 2013/Price of 2013 market basket in 2008) x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Which of the following characteristics would indicate that an item sold would have a high price elasticity of demand?

a. The cost of the item is low compared to the total budget of the purchasers.
b. The item is considered a necessity.
c. The item has many similar substitutes.
d. Changes in the price of the item re regulated by governmental agency.

A

The item has many similar substitutes.

35
Q

Which of the following economic terms describes a general decline in prices for goods and services and in the level of interest rates?

a. Recession.
b. Expansion.
c. Deflation.
d. Inflation.

A

Deflation.

36
Q

Platinum Co. has a receivable due in 30 days for 30,000 euros. The treasurer is concerned that the value of the euro relative to the dollar will drop before the
payment is received. What should Platinum do to reduce the risk?

A

Enter into a forward contract to sell 30,000 euros in 30 days.

37
Q

Which of the following instruments of monetary policy is the most important means by which the money supply is controlled?

a. Changing the discount rate.
b. Changing the reserve ratio.
c. Open market operations.
d. Manipulation of government spending.

A

Open market operations.

38
Q

In the law of comparative advantage, the country which should produce a specific product is determined by

A

Opportunity costs.

39
Q

The rate of unemployment caused by changes in the composition of unemployment opportunities over time is referred to as the

A

Structural unemployment rate.

40
Q

In the short run, a severe hurricane creates an immediate strong increase in demand for roofers. Some roofers in other parts of the country are then attracted to the
disaster area. Assume that in the long run the increase in demand still exceeds the increase in supply. Incorporating these facts in an analysis, the price for roofers
in the short run increases, while in the long run the price will

A

Decrease, but remain above the original price.

41
Q

In a competitive market for labor in which demand is stable, if workers try to increase their wage

A

Employment must fall.

42
Q

Which of the following actions is the acknowledged preventive measure for a period of deflation?

a. Decreasing the money supply.
b. Increasing interest rates.
c. Decreasing interest rates.
d. Increasing the money supply.

A

Increasing the money supply.

43
Q

If both the supply and the demand for a good increase, the market price will

A

Not be predictable with only these facts.

44
Q

Which of the following statements is correct if there is an increase in the resources available within an economy?

a. More goods and services will be produced in the economy.
b. The economy will be capable of producing more goods and services.
c. The standard of living in the economy will rise.
d. The technological efficiency of the economy will improve.

A

The economy will be capable of producing more goods and services.

45
Q

Which of the following changes would create pressure for the Japanese yen to appreciate relative to the US dollar?

a. A change in Japanese tastes in favor of US goods.
b. A change in US tastes in favor of Japanese goods.
c. An increase in incomes in Japan.
d. A decrease in US incomes.

A

A change in US tastes in favor of Japanese goods.

46
Q

Companies can reduce the potential loss from host-government expropriation of their foreign subsidiaries by

A

Financing the subsidiary with local-country capital.

47
Q

A country’s currency conversion value has recently changed from 1.5 to the US dollar to 1.7 to the LiS dollar. Which of the following statements about the country is
correct?
a. Its exports are less expensive for the United States.
b. Its imports of US goods are more affordable.
c. Its currency has appreciated.
d. Its purchases of the US dollar will cost less.

A

Its exports are less expensive for the United States.

48
Q

For a given level of tax collections, prices, and interest rates, a decrease in government purchases will result in a(n)

a. Decrease in aggregate supply.
b. Decrease in aggregate demand.
c. Increase in aggregate demand.
d. Increase in aggregate supply.

A

Decrease in aggregate demand.

49
Q

Some economic indicators lead the economy into a recovery or recession, and some lag it. An example of a lag variable would be

a. Orders for consumer and producer goods.
b. Housing starts.
c. Average duration of unemployment.
d. Consumer expectations.

A

Average duration of unemployment.

50
Q 
Which of the following activities involves collecting data about all segments of the firm’s general environment to understand the effects of economic changes on the
firm’s industry?
a. Forecasting.
b. Scanning.
c. Assessing.
d. Monitoring.
A

Scanning.

51
Q

Which of the following management techniques would likely be most important to a firm in a purely competitive market?

a. Supply chain management.
b. Price-elasticity analysis.
c. Target market analysis.
d. Competitor analysis.

A

Supply chain management.

52
Q

A multinational company operates a production facility in country A and a distribution outlet in country B. The tax rates are 40% in country A and 50% in country B.
The production facility sells the goods to the distribution outlet, both of which are wholly owned by the multinational company. The internal sale of goods occurs at a “transfer price set by the multinational company. Assuming no nontax considerations and no interference from the tax authorities of the two countries, the company
should

A

Maximize the transfer price.

53
Q

The two main variables that contribute to increases in a nation’s real gross domestic product (GDP) are labor productivity and

A

Total worker hours.

54
Q

If the value of the US dollar in foreign currency markets changes from $1 = 95 yen to $1 = 90 yen,

A

Japanese imported products in the US will become more expensive.

55
Q

Which of the following is correct regarding the consumer price index (CPI) for measuring the estimated decrease in a company’s buying power?

a. The products a company buys should differ from what a consumer buys.
b. The CPI is skewed by foreign currency translations.
c. The CPI measures what consumers will pay for items.
d. The CPI is measured only once every 10 years.

A

The products a company buys should differ from what a consumer buys.

56
Q

A short-term speculative rise in the worldwide value of domestic currency could be moderated by a central bank decision to

A

Sell domestic currency in the foreign exchange market.

57
Q

Which of the following is not accurate about product differentiation?

a. Differentiation can be achieved by market segmentation.
b. Differentiation can only be perceived by the consumer based on brand name.
c. Differentiation is always related to the cost of producing the product.
d. Differentiation can be based on service.

A

Differentiation is always related to the cost of producing the product.

58
Q

Which of the following types of merger is most likely to contribute to the formation of an oligopoly?

a. Vertical.
b. Divestiture.
c. Horizontal.
d. Conglomerate.

A

Horizontal.

59
Q

The US dollar has a free-floating exchange rate. When the dollar has fallen considerably in relation to other currencies the

A

Cheaper dollar helps US exporters of domestically produced goods.

60
Q

Gross domestic product includes which of the following measures?

a. The total monetary value of all final goods and services produced within a nation in one year.
b. The negative externalities of the production process of a nation within one year.
c. The size of a population that must share a given output within one year.
d. The total monetary value of goods and services including barter transactions within a nation in one year.

A

The total monetary value of all final goods and services produced within a nation in one year.

61
Q

Which of the following may provide a leading indicator of a future increase in gross domestic product?

a. An increase in the timeliness of delivery by vendors.
b. A reduction in the money supply.
c. An increase in the average hours worked per week of production workers.
d. A decrease in the issuance of building permits.

A

An increase in the average hours worked per week of production workers.

62
Q

The discount rate of the Federal Reserve System is

A

The rate that the central bank charges for loans granted to commercial banks.

63
Q

If the US dollar declines in value relative to the currencies of many of its trading partners, the likely result is that

A

US exports will tend to increase.

64
Q

What does the consumer price index measure?

A

Rate of inflation.

65
Q

A period of rising inflation

A

Increases the price level, which is negatively related to the purchasing power of money.

66
Q

The real risk-free rate

A

Is the basic component of interest.

67
Q

All of the following are complementary goods except

A

Margarine and butter.

68
Q

All of the following are components of the formula used to calculate gross domestic product except:

a. Gross investment.
b. Household income.
c. Foreign net export spending.
d. Government spending.

A

Household income.

69
Q

This question is based on the following information.
Total units of product Average fixed cost
6 $15.00
7 12.86
8 11.25
9 10.00
Average variable cost Average total cost
$25.00 $40.00
24.00 36.86
23.50 34.75
23.75 33.75
The marginal cost of producing the ninth unit is

A

$25.75

70
Q

Disposable income is calculated as

A

Personal income minus personal taxes.

71
Q

An individual exhibiting the following savings and consumption pattern has a marginal propensity to consume of
Year Income level Savings Consumption
1 $10,000 $2,000 $8,000
2 $15,000 $5,000 $10,000

A

0.40

72
Q

Exchange rates are determined by

A

Supply and demand in the foreign exchange market.

73
Q

If the exchange rate has changed from 1 US dollar being worth 1.00 Swiss francs to a rate of 1 US dollar being worth 1.10 Swiss francs,

A

The US dollar has appreciated by 10%.

74
Q

If the dollar price of the euro rises, which of the following will occur?

a. The euro will buy fewer European goods.
b. The dollar depreciates against the euro.
c. The euro will buy fewer US goods.
d. The euro depreciates against the dollar.

A

The dollar depreciates against the euro.

75
Q

An individual receives an income of $3,000 per month, and spends $2,500. An increase in income of $500 per month occurs, and the individual spends $2,800. The
individual’s marginal propensity to save is

A

0.4

76
Q

Under which of the following conditions is the supplier most able to influence or control buyers?

a. When the purchasing industry is an important customer to the supply industry.
b. When the supplier’s products are not differentiated.
c. When the supplier does not face the threat of substitute products.
d. When the industry is controlled by a large number of companies.

A

When the supplier does not face the threat of substitute products.

77
Q

Which of the following is not a characteristic of a purely competitive market?

a. No significant control over product price exerted by individual firms.
b. A very large number of producing firms.
d. Differentiated products.
c. No barriers to entry for new firms.

A

Differentiated products.

78
Q

To address the problem of a recession, the Federal Reserve Bank most likely would take which of the following actions?

a. Sell US government bonds in open-market transactions.
b. Lower the discount rate it charges to banks for loans.
c. Increase the level of funds a bank is legally required to hold in reserve.
d. Increase the federal funds rate charged by banks when they borrow from one another.

A

Lower the discount rate it charges to banks for loans.

79
Q

The local video store’s business increased by 12% after the movie theater raised its prices from $6.50 to $7.00. Thus, relative to movie theater admissions videos
are

A

Substitute goods.

80
Q

Implementation of a government’s monetary policy in most major industrial countries is managed by

A

The central bank.

81
Q

An economy is at the peak of the business cycle. Which of the following policy packages is the most effective way to dampen the economy and prevent inflation?

a. Reduce government spending, increase taxes, increase money supply, and increase interest rates.
b. Increase government spending, reduce taxes, increase money supply, and reduce interest rates.
c. Reduce government spending, increase taxes, reduce money supply and increase interest rates.
d. Reduce government spending, reduce taxes, reduce money supply, and reduce interest rates.

A

Reduce government spending, increase taxes, reduce money supply and increase interest rates.

82
Q

An expansionary policy will have effect on net exports.
List A List B
A. Fiscal A negative
B. Fiscal No
C. Monetary A negative
D. Monetary No

A

A. Fiscal A negative

83
Q

The distinguishing characteristic of oligopolistic markets is

A

Mutual interdependence of firm pricing and output decisions.

84
Q

Greater barriers to collusion exist for oligopolistic firms when

A

General economic conditions are recessionary.

Business Environment (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions