Mock: Practice academy Flashcards
What are benefits that can be linked to international trade? (ie. benefits of free trade)
- It promotes specialisation and efficiency in production
- It promotes efficient allocation and and better utilisation of resources
- It facilitates economies of scale (both for the consumer and businesses)
When people are unemployed for a short time it is referred to as?
Frictional unemployment
State whether the following events would affect the AD or the AS Curve. Also, indicate whether these events would shift the curves to the RIGHT or to the LEFT:
An increase in trade union power and militancy:
AS
Left
A rise in interest rates.
AD
Left
New training initiatives for the unemployed. (*factor of production impact aggregate supply)
AS
Right
Which of the following statements is CORRECT with regards to monetary policy?
A. Unlike fiscal policy, monetary policy is only expansionary.
B. Unlike fiscal policy, monetary policy is only contractionary.
C. Monetary policy can be expansionary and contractionary.
D. Monetary policy can be inflationary or deflationary.
Answer: C
C. Monetary policy can be expansionary and contractionary.
note: Like fiscal policy, monetary policy can be described as expansionary or contractionary. An expansionary policy increases the total supply of money in the economy, and a contractionary policy decreases the total money supply. Expansionary policy is traditionally used to combat unemployment in a recession by lowering interest rates, while contractionary policy has the goal of raising interest to combat inflation.
Which TWO of the following can result in a rise in share price?
A. Positive net present value
B. Higher future cash flow than previous forecast
C. Higher cost of capital
D. Higher internal rate of return
Answer: A and D
- Positive net present value
- Higher internal rate of return
An economy is mixed if:
A. It is a combination of free markets and government intervention.
70%
B. It is a combination of a command economy and free markets.
22%
C. It is controlled by market forces.
3%
D. It is a free economy with minimal government intervention.
A. It is a combination of free markets and government intervention.
70%
**Bentik Co has made an investment of $15,000 in a project that will give an internal rate of return of 10%. Bentik’s cost of capital for any project is 8%. The income is an eight-year annuity starting in one year’s time.
Provide an answer to the nearest full $:
the correct answer is 2,812…
$15,000/AF1–8 at 10% = $15,000/5.335 = $2,812
Local authorities trade in debt instruments in which ONE of the following markets?
A. The discount market
B. The inter-bank market
C. The finance house market
D. The local government market
D. The local government market
**How long will it take to double an original investment of 100 GBP if the rate of return is 8% per annum? (Provide the answer as a round figure).
N = (log FV – log PV)/log (I+r) = (log 200 – log 100)/log1.08 = 9
The government of the UK wants to raise revenue by imposing a tariff on the import of goods from the USA. On which of the following types of import should the government levy a tariff to raise revenue?
A. Imports with unit elastic demand
B. Imports with elastic demand
C. Imports with inelastic demand
D. Imports with perfectly inelastic demand
C. Imports with inelastic demand
Explanation: if the good is inelastic then price won’t impact the demand. So if the gov ad a tax to its import hence pushing price up the demand doesn’t change and so the gov raises money this way
**Which of the following will cause suppliers to accept a lower price for their goods?
A. Contraction in demand
35%
B. Contraction in supply
35%
C. Expansion in supply
16%
D. Expansion in demand
14%
B. Contraction in supply
35%
why is this not a contraction in demand?
Management can use the PEST framework to analyse the macro-environment and identify opportunities and threats that could affect the organisation. Increasing public concern for the natural environment, corporate social responsibility and sustainability in recent years has led to the inclusion of the letters E and L in PEST analysis, making it PESTEL analysis.
Before this happened, which letter in PEST was associated with the factors covered by the new L heading?
A. P
75%
B. E
9%
C. S
14%
D. T
2%
A. P
75%
P stands for Political and legal in PEST analysis. E stands for Economic, S stands for Social factors and T stands for Technological.
**Choose the MOST correct of the following statements regarding index numbers:
A. Base-weighted and current-weighted index numbers are more or less equal and have similar characteristics.
10%
B. The current weighted system gives higher values than the base-weighted system.
16%
C. The base-weighted system gives higher values than the current-weighted system.
56%
D. There is no regular relationship between the base-weighted and current-weighted systems.
C. The base-weighted system gives higher values than the current-weighted system.
explanation: Typically, base-weighted index numbers don’t consider high-priced items that customers buy less. As a result of this omission, base-weighted index numbers exaggerate inflation. This is why they are higher than current-weighted index numbers.
other: current weighting removes the effects of goods which may be subject to high price rises eg. cigarettes
Alex incurred $5,000 for registering and incorporating the company in March 2017. The cost of registering and incorporating the company can be categorised as:
A. Information cost
1%
B. Agency cost
8%
C. Transaction cost
57%
D. Legal fees
C. Transaction cost
The cost of incorporating and registering the company is a transaction cost.
As described in the Kaplan study book ):
A company has a choice for any economic activity: performing the activity inhouse or going to market. In either case, the cost of the activity can be decomposed into production costs, which are direct and indirect costs of producing the good or service, and transaction costs, which are other (indirect) costs incurred in performing the economic activity, for example the expenses incurred through outsourcing, including network organisations, shared service centres and flexible staffing.
In this way, if the split is production costs or transaction costs, of course incorporation costs are classified as transaction costs.
Getup Bank is a large international bank. Which ONE of the following would be classified as a connected stakeholder for Getup Bank?
A. The bank’s employees
4%
B. The bank’s customers
84%
C. Trade unions representing the interests of the bank’s employees
4%
D. The banking regulator (government)
B. The bank’s customers
Connected stakeholders either invest in or have dealings with Getup Bank.
