Government And Economic INFLuences On Business Activity
Exam revisionBusiness studies
- 1.
All of the following are examples of government economic objectives except:
- A.
Low price inflation
- B.
Economic growth
- C.
Low levels of unemploymen
- D.
Low levels of exports.
Correct Answer
D. Low levels of exports.Explanation
The government's economic objectives typically include low price inflation, economic growth, and low levels of unemployment. These objectives are aimed at maintaining a stable economy and improving the standard of living for its citizens. However, low levels of exports are not typically considered a government economic objective. Export levels are usually influenced by market conditions and international trade policies rather than being directly controlled by the government.Rate this question:
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- 2.
A low rate of inflation means that:
- A.
A firm’s sales revenue is rising only slowly each year
- B.
The economy is growing slowly each year
- C.
Average prices are increasing at a low rate
- D.
Average prices are falling year by year.
Correct Answer
C. Average prices are increasing at a low rateExplanation
A low rate of inflation indicates that average prices in the economy are increasing, but at a slow pace. This means that the cost of goods and services is rising, but not significantly. It does not imply that sales revenue for a firm is rising slowly or that the economy is growing slowly. Instead, it highlights that the overall increase in prices is minimal.Rate this question:
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- 3.
Which of the following is NOT a benefit of economic growth to a country?
- A.
The rate of unemployment usually falls.
- B.
There will be more business failures.
- C.
There will be more goods and services produced.
- D.
Average living standards are likely to rise.
Correct Answer
B. There will be more business failures.Explanation
Economic growth typically leads to a decrease in unemployment rates as more jobs are created. Additionally, economic growth results in an increase in the production of goods and services, which contributes to the overall development of the country. As the economy expands, average living standards are likely to improve, leading to a better quality of life for the citizens. However, one potential drawback of economic growth is the possibility of more business failures, as increased competition and market dynamics can lead to some companies not being able to sustain their operations.Rate this question:
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- 4.
If the rate of inflation is too high the government would probably:
- A.
Raise government spending and reduce taxes
- B.
Reduce government spending and raise taxes
- C.
Lower rates of interest and raise government spending
- D.
Reduce taxes and lower rates of interest.
Correct Answer
B. Reduce government spending and raise taxesExplanation
If the rate of inflation is too high, the government would probably reduce government spending and raise taxes. This is because high inflation indicates an increase in prices, which can lead to a decrease in the purchasing power of individuals. To combat this, the government may reduce its spending to decrease the demand for goods and services, which can help stabilize prices. Additionally, raising taxes can help reduce the amount of money in circulation, which can further help control inflation.Rate this question:
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- 5.
Which of the following is a tax on company profits? a) corporation tax b) income tax c) value added tax d) import duties
- A.
Corporation tax
- B.
Income tax
- C.
Value added tax
- D.
Import duties
Correct Answer
A. Corporation taxExplanation
Corporation tax is a tax imposed on the profits of a company. It is a direct tax levied by the government on the income earned by corporations or businesses. The tax is calculated based on the net profit of the company after deducting expenses and allowances. This tax is specific to companies and not applicable to individuals. Therefore, corporation tax is the correct answer for the question.Rate this question:
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- 6.
Economic growth is best measured by:
- A.
Changes in the level of unemployment
- B.
The balance of payments
- C.
Changes in gross national product
- D.
The rate of inflation.
Correct Answer
C. Changes in gross national productExplanation
Economic growth is best measured by changes in gross national product because it reflects the overall increase in the value of goods and services produced by a country's economy. Gross national product takes into account all economic activities within a country, including consumption, investment, government spending, and net exports. It provides a comprehensive measure of the size and health of an economy, indicating whether it is expanding or contracting. Changes in gross national product also indirectly capture changes in employment, inflation, and trade balance, making it a reliable indicator of economic growth.Rate this question:
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- 7.
In the business or economic cycle the best definition of a recession is:
- A.
A fall in sales and output for one business
- B.
A fall in the rate of inflation
- C.
A fall in gross national product
- D.
A fall in the rate at which gross national product is rising.
Correct Answer
C. A fall in gross national productExplanation
A recession is defined as a period of significant decline in economic activity, characterized by a decrease in the gross national product (GNP). This means that there is a fall in the total value of goods and services produced by a country over a specific period of time. A decrease in GNP indicates a contraction in the overall economy, with reduced production, lower employment rates, and decreased consumer spending. Therefore, the answer "a fall in gross national product" accurately describes the definition of a recession.Rate this question:
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- 8.
Which of the following businesses is most likely to be badly affected by a long recession?
- A.
A luxury car maker
- B.
The postal service
- C.
A company operating bus services
- D.
A bakery
Correct Answer
A. A luxury car makerExplanation
A luxury car maker is most likely to be badly affected by a long recession because during economic downturns, consumers tend to cut back on non-essential purchases such as luxury cars. As people have less disposable income and are more cautious about their spending, they are less likely to prioritize buying expensive vehicles. This can lead to a decline in sales and revenue for luxury car makers, making them vulnerable to the negative impacts of a long recession.Rate this question:
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- 9.
If interest rates increase all of the following will be likely to result except:
- A.
A rise in the cost of business loans
- B.
A fall in demand for expensive products
- C.
A reduction in business investment and expansion plans
- D.
rise in sales paid for by consumers on credit.
Correct Answer
D. rise in sales paid for by consumers on credit.Explanation
If interest rates increase, it will lead to a rise in the cost of business loans, as higher interest rates mean higher borrowing costs for businesses. It will also result in a fall in demand for expensive products, as higher interest rates make borrowing more expensive for consumers, reducing their purchasing power. Additionally, businesses will likely reduce their investment and expansion plans due to the increased cost of borrowing. However, a rise in sales paid for by consumers on credit is not likely to result from higher interest rates, as higher interest rates discourage borrowing and make credit less attractive for consumers.Rate this question:
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- 10.
Government controls over business activity usually include all of these except:
- A.
Where the business locates
- B.
The method of production used
- C.
The amount of pollution allowed
- D.
The advertising of the products to the consumers.
Correct Answer
B. The method of production usedExplanation
Government controls over business activity typically involve regulations and restrictions on various aspects of the business operations. This can include the location of the business, the amount of pollution allowed, and the advertising of products to consumers. However, the method of production used by a business is generally not directly controlled by the government. While there may be regulations in place to ensure safety and quality standards, the government typically does not dictate the specific methods or techniques that a business must use in its production process.Rate this question:
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- 11.
Which of the following reasons explains why governments usually control monopolies?
- A.
Prices are often higher under monopoly
- B.
Costs of production are often lower under monopoly
- C.
There is more consumer choice under monopoly.
- D.
New firms are able to join the industry easily to create more competition.
Correct Answer
A. Prices are often higher under monopolyExplanation
Governments usually control monopolies because prices are often higher under monopoly. Monopolies have the power to set prices at a level that maximizes their profits, often resulting in higher prices for consumers. By controlling monopolies, governments can regulate prices to ensure they are fair and affordable for consumers. This helps prevent exploitation and promotes competition in the market, ultimately benefiting consumers.Rate this question:
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- 12.
One reason why governments often support small businesses is because:
- A.
They will become monopolists one day
- B.
They provide competition for larger firms
- C.
They pay more profits tax than larger firms
- D.
Each small firm employs more staff than large firms.
Correct Answer
B. They provide competition for larger firmsExplanation
Governments often support small businesses because they provide competition for larger firms. This competition helps to prevent monopolies from forming and promotes a healthy and competitive market. Small businesses offer different products or services, and their presence in the market encourages innovation and diversity. Additionally, supporting small businesses can also contribute to job creation and economic growth.Rate this question:
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- 13.
One of the possible drawbacks to a legal minimum wage is that:
- A.
It will lead to lower wages for all employees
- B.
Unemployed people will be discouraged from looking for work
- C.
It could raise business costs and therefore prices
- D.
It will encourage more employers to exploit their workers.
Correct Answer
C. It could raise business costs and therefore pricesExplanation
A legal minimum wage could raise business costs because employers would be required to pay their employees a higher wage. This increase in labor costs could lead to higher prices for goods and services in order for businesses to maintain their profit margins. As a result, consumers may have to pay more for the same products, which could have a negative impact on their purchasing power.Rate this question:
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- 14.
14 A meat pie factory has to follow all of these Health and Safety regulations except:
- A.
Machinery must be well protected and regularly checked.
- B.
Workers must have clean working conditions and some work breaks.
- C.
Meat must be of the highest quality.
- D.
Meat must be kept in hygienic conditions.
Correct Answer
C. Meat must be of the highest quality.Explanation
The meat pie factory must follow all of the Health and Safety regulations mentioned except for ensuring that the meat is of the highest quality. While it is important for the meat to be of good quality, this specific regulation does not directly relate to the health and safety of the workers or the condition of the machinery. The other regulations mentioned focus on protecting the machinery, providing clean working conditions and work breaks for the workers, and maintaining hygienic conditions for the meat.Rate this question:
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- 15.
A government is most likely to assist firms in exporting by:
- A.
Buying the products and trying to sell them abroad itself
- B.
Helping to organise trade fairs abroad for firms to display their products
- C.
Paying for the exports so that foreign customers are encouraged to buy more
- D.
Putting import tariffs on goods from many big countries.
Correct Answer
B. Helping to organise trade fairs abroad for firms to display their productsExplanation
The government is most likely to assist firms in exporting by helping to organize trade fairs abroad for firms to display their products. This allows firms to showcase their products to potential foreign customers and establish business connections. Trade fairs provide a platform for firms to promote their products and expand their market reach. By organizing these events, the government facilitates international trade and supports firms in their export efforts.Rate this question:
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Mar 21, 2023Quiz Edited by
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Apr 18, 2010Quiz Created by
Sachou10
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