CIMA BA1 Fundamentals of Business Economics Exam Practice Test

The amount of tax paid by a taxpayer falls as income rises

The rate of tax is different for different income levels

The proportion of income paid in tax rises as income falls

The tax is levied on expenditure not income

contractionary monetary policy.

contractionary fiscal policy.

expansionary fiscal policy.

expansionary monetary policy.

Demographic statistics published in a census

The l{ addresses of computers in these areas

The level of youth unemployment as recorded by the government

The prominence of other brands focused on young people in the area

UK exports have become less price competitive

The UK inflation rate has increased

UK interest rates must have increased

The strengthening pound has improved the UK balance of payments on current account

This is an example of

Translation risk avoidance

Arbitrage

hedging

£20 million

£40 million

£80 million

£400 million

private business providers would exploit consumers and make excess profits

it would be an unprofitable activity for private business because of the free-rider problem

governments are more efficient producers of such goods

there are significant external costs in the production process

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

Construct a new factory, increasing both staff within the business and the company's production capacity

Invest in research and development so as to perfect the cereal-making process and maintain the company's position as a market leader

Build a long-term marketing strategy involving social media to boost product awareness and hence sales

Decrease the interest rates across the whole economy to limit foreign investment

Reduce bureaucracy by removing quotas and obligations for imported goods

Increase the rate of income tax by 10% in each bracket

Increase the rate of interest in the economy by 5%

Import prices must be falling

The volume of goods exported must be falling

Aggregate demand is falling

The difference between government spending and tax revenue is growing

£1,021

£1,070

£1,225.15

£1,155.12

Demand would fall as consumers would look for alternative teddy bears to buy

Demand would increase because the teddy bears would be seen as more prestigious by consumers due to their higher prices

Demand would fall as the relationship between price and demand as shown in the graph is inelastic

Demand would increase as the relationship between price and demand as shown in the graph is elastic

To reduce competition in the industry

To secure economies of scale

To secure sources of supply

To pool technology and research

The laws of a country that govern the companies within it

A market where a small number of dominant firm controls prices and quantities

The systems by which organizations are directed and controlled

A situation where management act as agents for shareholders

non-excludability in consumption

external social costs in production

external social benefits in consumption

non-rivalry in consumption

Economic welfare always increases

The problem of government failure may result

In all cases the market mechanism ceases to function

The intervention always creates a surplus

Connected

Internal

External

Collaborative

Steel

Second-hand cars

Public transport

Motor insurance

Imperfect market information may prevent the market working efficiently

Trading can only take place at equilibrium prices in a market economy

A fall in the relative price of a good tends to attract consumers to buy that good instead of other goods

In a market economy some essential goods may not be produced.

Normal profit will rise if the cost of production is falling as output increases

Profit per unit is equal to the difference between average revenue and average total cost

The point of profit maximization is always where average costs are lowest

A rise in output will always raise profits provided total revenue is rising

Supply curve to shift to the right

Demand curve to shift to the right

Demand curve to shift to the left

Supply curve to shift to the left

Different stakeholders have different objectives

The various stakeholders have differing degrees of influence

Stakeholder conflict only occurs in not-for -profit organizations

Stakeholders with high interest sometimes have limited influence

A price floor (minimum price) has been set above free market price

A price ceiling (maximum price) has been set above free market price

A price floor (minimum price) has been set below free market price

A price ceiling (maximum price) has been set below free market price

Significant economies of scale in production

The existence of entry barriers to the industry

High initial capital costs in production

Extensive consumer knowledge of products and prices

seek profits as the primary business objective

concentrate on the long run growth of sales

attempt to meet the differing demands of various stakeholders

satisfy shareholders demands to maximize shareholder wealth

No charge is made for it by its supplier

Its provision is financed by taxation

It is produced from renewable resources

It is available at zero cost of production in unlimited quantities

It is the price at which Marginal Revenue is zero

At this price, the price elasticity of demand will be unity (i.e. equal to 1)

This price will ensure the promoter covers the cost of the concert

This is the price which maximizes the revenue the promoter earns from the concert

Short-term loans to help a firm through a cash flow crisis

Finance that is neither pure debt nor pure equity

Loans made by non-financial institutions

Loans made in foreign currency

Profit maximizing

Satisfying

Behavioral

Managerial

A primary market for newly issued private securities

A secondary market to make existing shares liquid

A provider of regulation over assets and trading methods

A lender of last resort to the banking system

Not need to engage in exchange equalization

Allow market forces to determine the exchange rate within a strictly limited band

Have less ability to control the money supply than in a fixed exchange rate system

Have to intervene in foreign exchange markets in order to maintain the system

Economic welfare is maximized

Government expenditure on the provision of public goods increases

The incentive to provide private health care through the market disappears

Provision of merit goods by the state is taking place

Lender of the last resort

Banker to the commercial banks

The conduct of fiscal policy

Regulation of the banking system

Balance of payments will improve

Balance of payments will deteriorate

Terms of trade will improve

The central bank will be forced to borrow more foreign exchange to cover the shortfall

Holder of bank accounts on behalf of the commercial banks

Lender of liquidity to the commercial banks

Provider of capital and liquidity to the government

Chief advisor to government on taxation policy

Assist national governments with a budget deficit

Assist national governments to repay their National Debts

Finance specific development projects in Third World countries

Help member countries with temporary balance of payments deficits

Higher capital adequacy ratios for commercial banks

A reduction in the required liquidity ratio for commercial banks

The merging of retail and investment banking

The purchase of bank shares by the government

(i) and (ii) only

(ii) and (iv) only

(iii) and (iv) only

(i), (iii) and (iv) only

Retained profits

Certificates of deposit

New share issues

Mortgages

the expected cash flows from the project

the scrap value of the capital at the end of the project's life

interest rates

the net present value of alternative projects

An insurance company based in Country E opens a sales office in Country F in order to service the local market

A music production company based in Country C signs a contract with an artist's management company based in Country D.

A retailer based in Country G uses an online retail platform in order to sell goods to customers in Country H.

A chain of restaurants based in Country B signs a franchise agreement with a company that intends to open restaurants in Country A.

Economic risk

Energy risk

Transaction risk

Translation risk

Revaluation of the domestic currency

Deflationary policy to prevent rising inflationary pressure

Reduce aggregate demand by raising interest rates, taxation, and reducing public expenditure.

Raise aggregate demand by lowering interest rates, reducing taxation and raising public expenditure

sell bonds and raise interest rates

buy bonds and reduce interest rates

sell bonds and reduce interest rates

buy bonds and raise interest rates

-S3,300

+54.800

-SI 6.800

+S4.000

To devolve decision-making

To pool resources

To share skills and knowledge

To specialise

To earn profits

To create hierarchies

21%

50%

25%

41%

Increasing investment in vocational training for unemployed youth

Providing tax incentives to firms investing in new technology

Reducing the rate of value added tax applied to consumer goods

Increasing current expenditure on a national medical service

Introducing a funding scheme to support university research

Applying a tariff on the import of foreign technology

The European Central Bank

The World Trade Organisation

The International Monetary Fund

The World Bank

improving the working condition and pay levels for the employees

Maximising shareholder wealth

Meeting the legally required environmental standards in the industry

Raising the level of dividends paid out

Increasing the remuneration packages of the company directors

$2, 400

$1, 400

$2, 500

$4, 000

has no effect on unemployment, and setting a minimum wage below the equilibrium wage results in increased unemployment

results in increased unemployment, and setting a minimum wage below the equilibrium wage has no effect on unemployment.

results in decreased unemployment, and setting a minimum wage below the equilibrium wage results in increased unemployment.

results in increased unemployment, and setting a minimum wage below the equilibrium wage results in decreased unemployment

Different governments imposing different health and safety requirements for agricultural products

An oil exporting country insisting that oil is paid for in US dollars

The abolition of subsidies given to farmers in the European Union

A requirement by the Japanese government that customs documents be presented and completed in Japanese

A leftward shift of the short-run aggregate supply curve

A rightward shift of the aggregate demand curve

A rightward shift of the long-run aggregate supply curve

A leftward shift of the aggregate demand curve

A shift in domestic income from consumers to producers of the goods

A rise in the domestic price of the imported good

Greater cost push inflationary pressure in the economy

A shift to the left in the demand curve for the imported good

A manufacturer of industrial machine tools

A chain of supermarket grocery stores

A motor insurance company

A toothpaste manufacturer

Cash (i.e. notes and coins)

Taxation

Contributions to state-provided pensions

Government bonds

Rising levels of unemployment.

Increased inflationary pressure.

Improving trade balances.

Increased government budget deficits.

Money be ignored because reaching the goals of the organization is all that matters

There is no need for the organization to be efficient

There is a trade off between financial and non-financial goals

Money limits how far the organization can achieve its goals

A fall in consumer incomes in the country.

An improvement in the country's terms of trade.

A depreciation in the exchange rate for the country's currency.

A rise in the rate of inflation in its trading partners' economies.

An improving overseas trade balance.

Falling levels of unemployment.

Increased inflationary pressure.

Rising government tax receipts.

cannot use monetary policy to reduce the level of unemployment without causing a rise in interest rates.

can only use fiscal policy to reduce the rate of unemployment in the short run but not in the long run.

can only use expansionary policy to reduce the level of unemployment if it is prepared to accept a higher rate of inflation.

in the long run expansionary fiscal and monetary policy can only lead to higher inflation and higher unemployment.

Conducts its activities and operations at low cost

Achieves the goals and objectives set for it

Finds the correct balance between cost and benefit

Doesn't make losses

The industry regulator

A firm selling equipment to the energy provider

Customers of the energy provider

The government

a shift in the aggregate demand curve to the right, a fall in output and employment and a rise in the price level

a shift in the aggregate demand curve to the left, a fall in output and employment and a fall in the price level

a shift in the aggregate demand curve to the left, a fall in output and employment and a rise in the price level

a shift in the aggregate demand curve to the right, a rise in output and employment and a rise in the price level

The IMF

The World Bank

The World Trade Organization

The G20