Review Questions 1

Question 1

Types of Risk that make up Financial Risk

Answer 1

Business
Operations
Supply-Chain
Product Liability
Political and Economic

Question 2

What is the primary source of funds for Sovereign Wealth Funds?

Answer 2

Earning from commodity-based exports and trade surpluses driven by the export manufactured goods

Question 3

Net Domestic Product Equation

Answer 3

GDP - Depreciation

Question 4

Net National Income Equation

Answer 4

NDP - Indirect Business Taxes

Question 5

Personal Income Equation

Answer 5

NI - Corp Taxes - Undistributed Profits - Social Security Contributions + Transfer Payments

Question 6

What is the relationship between Potential National Income and Actual National Income during a recession?

Answer 6

Potential exceeds Actual

Question 7

A country’s Current Account Balance equals what?

Answer 7

Net Exports + Net Investment Income + Net Transfers

Question 8

Monopoly can increase profit by increasing output and decreasing price as long as what?

Answer 8

Marginal Revenue > Marginal Cost

Question 9

Where does Diseconomies of scale begin?

Answer 9

When Average Total Cost (ATC) start to increase

Question 10

Federal Reserve can control the M1 money supply with what 3 ways?

Answer 10

Selling government securities
Changing the reserve ratio
Changing the discount rate

Question 11

Who prints money in the US?

Answer 11

US Treasurey

Question 12

Multiplier equation?

Answer 12

1/MPS

Question 13

If an issuer does not have an audit committee financial expert what must they do?

Answer 13

Disclose the reason why

Question 14

At what point in profit typically maximized?

Answer 14

MR = MC

Question 15

GDP Expenditure Approach Equation

Answer 15

Personal Consumption + Gross Private Domestic Investment + Government Purchases + Net Exports

Question 16

Pools of money accumulated from a country’s reserves that are provided for investment purposes that will benefit the country’s economy and citizens is what?

Answer 16

Sovereign Wealth Fund

Question 17

Real GDP Equation

Answer 17

(Nominal GDP/Price Index) X 100

Question 18

Real Per Capita Output is what?

Answer 18

Measure of Economic Growth

Question 19

Elasticity of Demand equation

Answer 19

% change Quantity / % change in Price

Question 20

Law of Diminishing Returns

Answer 20

The marginal product (output) fall as more units of variable are added to fixed inputs

Question 21

Average Fixed Cost has what curve shape?

Answer 21

Negatively Sloped

Question 22

Are diminishing returns a short-run or long-run problem?

Answer 22

short-run

Question 23

Are disceconomies of scale a short-run or long-run problem?

Answer 23

Long - run

Question 24

Does short-term or long-term financing offer greater flexibility

Answer 24

Short - term

Question 25

What defines something as a “Natural Monopoly”

Answer 25

A firm has increasing returns to scale

Question 26

What is the shape and relationship to the marginal revenue curve of the demand curve for a monopoly?

Answer 26

Negatively sloped, above Marginal Revenue

Question 27

Income Elasticity Equation

Answer 27

% change in quantity demand / % change in Income

Question 28

Inflation does what for the demand of foreign goods?

Answer 28

Increases the demand for foreign goods

Question 29

Are current prices in Nominal or Real GDP

Answer 29

Nominal