Wrong Answers Flashcards
What is not a key feature of organisations?
Creation of a product/service.
What are transaction costs associated with?
Outsourcing - the effort put into specifying what is required/delivery/monitoring are all transaction costs
What type of good will likely experience large fluctuations in supply due to supply lag?
Wheat - takes around a year to repurpose a field/plant a crop and harvest
What is the main benefit of specialisation of labour to a company?
It raises the productivity of labour
What is one criteria needed to enable economies of scale?
There has to be sufficient demand for the product.
What is an example of a Merit good?
Healthcare/Education
What is NOT a valid economic reason for producing goods and services by the state?
It is a necessity that is consumed by everyone.
What is NOT a tool that the government can use to attempt to stabilise markets?
Setting a minimum wage - this will not help producers determine how much of the good to supply
If interest rates fall - how might this affect the price of bonds?
If interest rates fall, bonds will rise because they become a more attractive investment.
What is the main reason that borrowers and lenders are unlikely to contact each other directly?
High costs
What is aggregate demand made up of?
Consumption, investment, government expenditure, exports.
How to calculate the value of the MPC?
Step 1: Calculate change in consumption
Step 2: Calculate change in income.
Step 3: Change in Consumption / Change in Income.
Answer = MPC.
What is NOT an argument in favour of a minimum wage?
It prevents people from working below the minimum wage.
What would lead a country’s balance of payments current account to move towards a surplus?
A rise in exports & foreign tourism into the country.
What are advantages of dirty floating exchange rates?
Make a country’s exports more competitive
Assisting in the control of inflation.
What does a rise in the reserve asset ratio lead to?
A fall in the level of liquidity in the banking sector
What do Keynesian economists prefer?
Keynesian economists prefer to use Fiscal policy to control the economy.
When is the revenue generated by an indirect tax the highest? (In general)
In general, when demand is inelastic & supply is also inelastic, tax revenue will be highest.
When demand is inelastic and supply is elastic, tax will affect consumers more.
When demand is elastic and supply is inelastic, tax will affect producers more.
If a firm finds that its revenue rises by 5% when it increases the price of it’s product by 5%, what is the PED?
Perfectly Inelastic - if the price has risen by 5% then volume sold must be unchanged for revenue to rise by 5%.
What could cause cost push inflation?
A shift in taxation towards indirect taxes and away from direct taxes.
A 6% bond is trading for 120% of it’s nominal value of £1000
What is the running yield of this bond?
Interest earned = 1000 * 0.06 = $60
Running yield = Interest Earned / Market Price of the bond
60/1200 = 5%
If assets are owned in a currency which is appreciating against another, what will happen?
Increase in value of assets due to translation risk
How do central banks ensure there is sufficient liquidity in the financial system?
By lending money to commercial banks
What is an advantage of having a fixed exchange rate?
Importers and exporters face less foreign exchange risk
