Practice Test: IB Business And Management- Business Organisation & Environment #1.5

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Practice Test: IB Business And Management- Business Organisation & Environment #1.5 - Quiz

Welcome to IB Business And Management- Business Organisation & Environment #1.5 practice test.
How successful business is when it comes to meeting its objectives is dependent on a lot of factors. These factors can stem from the external environment, which is how the business is organized internally or the external environment, which includes factors the business can’t control fully. Test your understanding of the business environment by taking up this comprehensive quiz.


Questions and Answers
  • 1. 

    Identify whether the following external factor affecting businesses is Political, Economic, Social or Technological: An aging population 

    • A.

      Political

    • B.

      Economic

    • C.

      Social

    • D.

      Technological

    Correct Answer
    C. Social
    Explanation
    The external factor of an aging population is classified as a social factor. This is because it pertains to the demographic composition of a society and the changes in age distribution. An aging population can have significant social implications, such as increased healthcare and pension costs, changes in consumer behavior, and a shift in workforce dynamics. Therefore, it is categorized as a social factor affecting businesses.

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  • 2. 

    Identify whether the following extrenal factor affecting businesses is Political, Economic, Social or Technological: Average family size changes 

    • A.

      Political

    • B.

      Economic

    • C.

      Social

    • D.

      Technological

    Correct Answer
    C. Social
    Explanation
    The average family size changing is a social factor affecting businesses. Changes in average family size can impact the demand for certain products and services, as well as the overall consumer behavior. For example, if the average family size decreases, there may be a higher demand for smaller housing units or single-serving food products. Additionally, changes in family size can also affect the labor market, as businesses may need to adapt their hiring and workforce strategies accordingly.

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  • 3. 

    Identify whether the following external factor affecting businesses is Political, Economic, Social or Technological: Consumer confidence levels

    • A.

      Political

    • B.

      Economic

    • C.

      Social

    • D.

      Technological

    Correct Answer
    B. Economic
    Explanation
    Consumer confidence levels are an external factor that affects businesses economically. Consumer confidence refers to the level of optimism or pessimism that consumers have about the economy and their personal financial situation. When consumer confidence is high, people are more likely to spend money on goods and services, which can positively impact businesses. On the other hand, when consumer confidence is low, people tend to be more cautious with their spending, which can negatively affect businesses. Therefore, consumer confidence levels are closely tied to the economic conditions and performance of businesses.

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  • 4. 

    Identify whether the following external factor affecting businesses is Political, Economic, Social or Technological: E-commerce developments

    • A.

      Political

    • B.

      Economic

    • C.

      Social

    • D.

      Technological

    Correct Answer
    D. Technological
    Explanation
    E-commerce developments refer to the advancements and growth in online business activities. This external factor primarily falls under the Technological category because it involves the use of technology and digital platforms for conducting business transactions. E-commerce developments include the use of online marketplaces, mobile apps, digital payment systems, and other technological innovations that enable businesses to sell products and services online. These advancements have greatly impacted the way businesses operate, allowing them to reach a wider customer base, streamline operations, and improve efficiency.

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  • 5. 

    Identify whether the following external factor affecting businesses is Political, Economic, Social or Technological: Employment legislation

    • A.

      Political

    • B.

      Economic

    • C.

      Social

    • D.

      Technological

    Correct Answer
    A. Political
    Explanation
    Employment legislation refers to the laws and regulations that govern the relationship between employers and employees. It includes laws related to minimum wage, working hours, workplace safety, discrimination, and other aspects of employment. As such, it falls under the category of political factors affecting businesses. These laws are determined and enforced by the government, making them a political consideration for businesses. Compliance with employment legislation is crucial for businesses to avoid legal issues and maintain a positive relationship with their employees.

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  • 6. 

    Identify whether the following external factor affecting businesses is Political, Economic, Social or Technological: Exchange rate fluctuations

    • A.

      Political

    • B.

      Economic

    • C.

      Social

    • D.

      Technological

    Correct Answer
    B. Economic
    Explanation
    Exchange rate fluctuations can have a significant impact on businesses, particularly those involved in international trade. Changes in exchange rates can affect the cost of importing and exporting goods, as well as the profitability of foreign investments. This falls under the economic category because it directly relates to the financial aspect of businesses and their ability to operate effectively in the global market.

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  • 7. 

    Identify whether the following external factor affecting businesses is Political, Economic, Social or Technological: Tariffs and Quotas

    • A.

      Political

    • B.

      Economic

    • C.

      Social

    • D.

      Technological

    Correct Answer
    A. Political
    Explanation
    Tariffs and quotas are external factors that are imposed by governments to regulate international trade. They are typically used to protect domestic industries and control imports and exports. Since tariffs and quotas are imposed by political authorities, they fall under the category of political factors affecting businesses.

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  • 8. 

    Identify whether the following external factor affecting businesses is Political, Economic, Social or Technological: Consumer protection legislation

    • A.

      Political

    • B.

      Economic

    • C.

      Social

    • D.

      Technological

    Correct Answer
    A. Political
    Explanation
    Consumer protection legislation is an external factor that affects businesses because it is a set of laws and regulations put in place by the government to protect the rights and interests of consumers. This legislation establishes guidelines and standards for businesses to ensure fair practices, product safety, and accurate information disclosure. As consumer protection legislation is enforced by the government, it falls under the category of political factors that can impact businesses.

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  • 9. 

    Identify whether the following external factor affecting businesses is Political, Economic, Social or Technological: Oil price changes

    • A.

      Political

    • B.

      Economic

    • C.

      Social

    • D.

      Technological

    Correct Answer
    B. Economic
    Explanation
    Oil price changes are considered an economic external factor affecting businesses. This is because fluctuations in oil prices can have a significant impact on the overall economy, as it affects the cost of production, transportation, and consumer spending. Changes in oil prices can also influence inflation rates, exchange rates, and overall economic stability. Therefore, businesses need to closely monitor and adapt to these economic changes to remain competitive and make informed decisions.

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  • 10. 

    Identify whether the following external factor affecting businesses is Political, Economic, Social or Technological: Scientific development

    • A.

      Political

    • B.

      Economic

    • C.

      Social

    • D.

      Technological

    Correct Answer
    D. Technological
    Explanation
    Scientific development is classified as a technological external factor affecting businesses because it refers to advancements and innovations in scientific knowledge and technology. These advancements can lead to the development of new products, processes, and technologies, which can impact businesses and industries. Technological factors include things like advancements in research and development, automation, artificial intelligence, and digitalization, all of which can have a significant impact on businesses in terms of efficiency, competitiveness, and the ability to adapt to changing market demands.

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  • 11. 

    Identify whether the following external factor affecting businesses is Political, Economic, Social or Technological: Interest rate changes (assume an independent central bank)

    • A.

      Political

    • B.

      Economic

    • C.

      Social

    • D.

      Technological

    Correct Answer
    B. Economic
    Explanation
    Interest rate changes can be considered an economic external factor affecting businesses because they directly impact borrowing costs, investment decisions, and consumer spending. When interest rates are low, businesses and individuals are more likely to borrow money for investments and purchases, stimulating economic growth. Conversely, when interest rates are high, borrowing becomes more expensive, leading to reduced spending and potentially slowing down economic activity. Therefore, interest rate changes primarily fall under the economic category of external factors affecting businesses.

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  • 12. 

    Identify whether the following external factor affecting businesses is Political, Economic, Social or Technological: Falling exchange rates

    • A.

      Political

    • B.

      Economic

    • C.

      Social

    • D.

      Technological

    Correct Answer
    B. Economic
    Explanation
    Falling exchange rates can be categorized as an economic external factor affecting businesses. Exchange rates play a crucial role in international trade and can impact the profitability and competitiveness of businesses. When exchange rates fall, it means that the value of a country's currency is decreasing relative to other currencies. This can lead to higher import costs, lower export revenues, and increased inflation, all of which can have significant economic implications for businesses operating in international markets.

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  • 13. 

    Falling rates of inflation will lead to lower prices in the economy.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Falling rates of inflation do not necessarily lead to lower prices in the economy. Inflation refers to the general increase in prices of goods and services over time. When inflation rates fall, it means that the rate at which prices are increasing is slowing down, but it does not imply that prices will decrease. Prices can still continue to rise, just at a slower pace. Therefore, the statement that falling rates of inflation will lead to lower prices in the economy is false.

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  • 14. 

    Inflation will tend to damage a country's international competitiveness.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Inflation refers to the increase in the general price level of goods and services in an economy over time. When a country experiences inflation, the prices of its goods and services increase. This can lead to higher production costs for businesses, making their products more expensive compared to those produced in countries with lower inflation rates. As a result, the country's exports become less competitive in the international market, as foreign consumers may opt for cheaper alternatives from other countries. Therefore, inflation tends to damage a country's international competitiveness.

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  • 15. 

    Deflation is good for an economy as prices are falling, demand will rise.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    This statement is false. Deflation, which refers to a sustained decrease in the general price level of goods and services, is generally considered harmful to an economy. When prices are falling, it can lead to a decrease in consumer spending as people delay purchases in anticipation of even lower prices. This reduction in demand can result in lower production levels, job losses, and economic contraction. Central banks often try to prevent deflation by implementing monetary policies to stimulate spending and increase inflation. Therefore, deflation is not good for an economy as it can have negative effects on overall economic activity.

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  • 16. 

    If the exchange rate between the NZ$ and US$ changes from NZ$1 = US$0.60 to NZ$1 = US$0.70, then the New Zealand dollar is said to have strengthened against the US dollar.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    When the exchange rate between the NZ$ and US$ changes from NZ$1 = US$0.60 to NZ$1 = US$0.70, it means that the New Zealand dollar can now buy more US dollars than before. This indicates that the New Zealand dollar has strengthened against the US dollar because it now has a higher value relative to the US dollar.

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  • 17. 

    France has a maximum working week of 35 hours. This is an example of an economic constraint on business. 

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    This statement is false because France does have a maximum working week of 35 hours, but it is not an economic constraint on business. Instead, it is a legal regulation implemented by the French government to promote work-life balance and protect workers' rights. While it may have economic implications for businesses, it is not a constraint imposed by the economy itself.

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  • 18. 

    An appreciation of the British pound against the euro will lead to a fall in UK exports to the rest of Europe.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    An appreciation of the British pound against the euro will actually make UK exports cheaper for the rest of Europe, which can lead to an increase in exports rather than a fall. When the British pound is strong, it means that one pound can buy more euros, making UK goods more affordable for European consumers. This can potentially boost demand for UK exports and increase export volumes. Therefore, the statement is false.

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  • 19. 

    Chinese importers will benefit from bilateral trade in the US dollar appreciates against the Chinese yuan.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Chinese importers will not benefit from bilateral trade if the US dollar appreciates against the Chinese yuan. When the US dollar appreciates, it means that the value of the US dollar increases relative to the Chinese yuan. This makes Chinese goods more expensive for US buyers, which can lead to a decrease in demand for Chinese imports. Therefore, Chinese importers are likely to be negatively affected by a stronger US dollar.

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  • 20. 

    An independent central bank or a government is likely to raise interest rates during times of inflationary pressure.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    During times of inflationary pressure, an independent central bank or government is likely to raise interest rates. This is because increasing interest rates helps to reduce spending and borrowing, which in turn can help to decrease inflation. By raising interest rates, it becomes more expensive for individuals and businesses to borrow money, leading to a decrease in spending and ultimately reducing inflationary pressure. This measure is often taken to control and stabilize the economy during periods of high inflation.

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  • 21. 

    ​If a government attempts to reduce unemployment, then it could consider cutting interest rates (providing it has the authority to do so).

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Cutting interest rates can be a measure taken by the government to reduce unemployment. When interest rates are lowered, it becomes cheaper for businesses and individuals to borrow money, which can stimulate investment and consumption. This increased economic activity can lead to job creation and ultimately reduce unemployment. However, it should be noted that cutting interest rates is just one of the many tools that a government can use to address unemployment, and its effectiveness may vary depending on the specific economic conditions and policies in place.

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  • 22. 

    Political factors affecting businesses do not directly include.

    • A.

      Legislative changes

    • B.

      Import taxes

    • C.

      The government's relationship with other nations

    • D.

      Floating exchange rates

    Correct Answer
    D. Floating exchange rates
    Explanation
    Political factors affecting businesses include legislative changes, import taxes, and the government's relationship with other nations. However, floating exchange rates are not directly influenced by political factors. Floating exchange rates are determined by market forces and are affected by economic factors such as inflation, interest rates, and market speculation. While political decisions can indirectly impact exchange rates, they are not a direct political factor affecting businesses.

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  • 23. 

    Social factors in the external environment take account of changes in:

    • A.

      Exchange rates

    • B.

      Company tax rates

    • C.

      Customs, habits and tastes

    • D.

      Interest rates

    Correct Answer
    C. Customs, habits and tastes
    Explanation
    Customs, habits, and tastes refer to the cultural and societal factors that influence consumer behavior and preferences. These factors vary across different regions and demographics, affecting the demand for products and services. Understanding and adapting to these customs, habits, and tastes is crucial for businesses to effectively target their marketing strategies and tailor their offerings to meet customer expectations. Therefore, considering these social factors is important for companies to stay competitive and successful in the external environment.

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  • 24. 

    Economic variables affecting businesses exclude changes in the level of a country's:

    • A.

      Unemployment

    • B.

      Education and training

    • C.

      Inflation

    • D.

      International trade

    Correct Answer
    B. Education and training
    Explanation
    Economic variables affecting businesses include factors such as unemployment, inflation, and international trade. However, education and training are not considered direct economic variables that impact businesses. While education and training can indirectly affect the economy and businesses in the long run by improving the skills and productivity of the workforce, they are not typically classified as immediate economic variables that directly influence business operations and outcomes.

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  • 25. 

    The study of population structures and trends and their likely impact on business activity is known as:

    • A.

      Social-cultural studies

    • B.

      Social trends

    • C.

      Demography

    • D.

      Populace

    Correct Answer
    C. Demography
    Explanation
    Demography is the study of population structures and trends, including factors such as birth rates, death rates, migration patterns, and age distribution. It focuses on understanding the size, composition, and characteristics of populations, as well as their dynamics and changes over time. This knowledge is crucial for businesses as it helps them understand the potential customer base, labor force, and market demand. By analyzing demographic data, businesses can make informed decisions about product development, marketing strategies, and resource allocation to effectively target and serve specific population segments.

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  • 26. 

    Which of the following strategies could be best used to deal with the problems caused by a short-term recession?

    • A.

      Reducing the size of the workforce

    • B.

      Moving to cheaper premises

    • C.

      Lowering prices to maintain sales

    • D.

      Redesign products to cater for income-sensitive customers

    Correct Answer
    C. Lowering prices to maintain sales
    Explanation
    Lowering prices to maintain sales is the best strategy to deal with the problems caused by a short-term recession. By lowering prices, businesses can attract more customers who are looking for affordable options during tough economic times. This can help maintain sales volume and revenue, which is crucial for businesses to stay afloat during a recession. Additionally, lowering prices can also help businesses stay competitive and gain market share, as customers are more likely to choose cheaper alternatives during a recession.

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  • 27. 

    Deregulation is:

    • A.

      The removal of controls in a particular industry

    • B.

      Imposing regulation to control the activities of businesses

    • C.

      Privatising businesses in the public sector

    • D.

      The fall in manufacturing output or employment in the secondary sector

    Correct Answer
    A. The removal of controls in a particular industry
    Explanation
    Deregulation refers to the process of removing controls or regulations in a specific industry. This means that the government reduces or eliminates restrictions and rules that govern the operations and activities of businesses within that industry. Deregulation aims to promote competition, increase efficiency, and stimulate innovation by allowing businesses more freedom in their operations. It is often seen as a way to encourage economic growth and development by reducing government intervention and bureaucracy.

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  • 28. 

    External constraints include all those listed below except:

    • A.

      Changes in consumer tastes

    • B.

      Social attitudes and cultures

    • C.

      External sources of finance

    • D.

      Unemployment levels

    Correct Answer
    C. External sources of finance
    Explanation
    External constraints refer to factors that are outside of a company's control but can have an impact on its operations. Changes in consumer tastes, social attitudes and cultures, and unemployment levels are all examples of external constraints because they can influence a company's ability to attract customers, adapt to societal expectations, and access a qualified workforce. However, external sources of finance are not considered external constraints because they are voluntary and can be sought out by a company to support its operations and growth.

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  • 29. 

    Which of the following is a direct tax?

    • A.

      Sales taxes

    • B.

      Alcohol, tobacco and petrol taxes

    • C.

      Excise duties

    • D.

      Taxes on interests and dividends

    Correct Answer
    D. Taxes on interests and dividends
    Explanation
    Taxes on interests and dividends are considered direct taxes because they are imposed directly on individuals or entities who earn income from interests and dividends. These taxes are based on the income earned and are typically paid by the recipient of the income. Unlike indirect taxes such as sales taxes, which are levied on the sale of goods and services and are ultimately passed on to the consumer, direct taxes are not shifted to someone else and are paid directly by the taxpayer.

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  • 30. 

    If the exchange rate between the NZ$ and US$ changes from NZ$1 = US$0.70 to NZ$1 = US$0.77, then the New Zealand dollar is said to have __________ against the US dollar.

    • A.

      Weakened

    • B.

      Strengthened

    • C.

      Deflated

    • D.

      Floated

    Correct Answer
    B. Strengthened
    Explanation
    When the exchange rate between the NZ$ and US$ increases from NZ$1 = US$0.70 to NZ$1 = US$0.77, it means that the New Zealand dollar has strengthened against the US dollar. This is because now, with 1 New Zealand dollar, you can get more US dollars compared to before. Therefore, the New Zealand dollar has gained value in relation to the US dollar, indicating a strengthening of the currency.

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  • 31. 

    Which of the following is not a valid reason for government intervention in business activity? 

    • A.

      To encourage competition between firms rather than allowing monopolies to exploit the market

    • B.

      To protect consumers through legislation

    • C.

      To protect the environment by punishing polluters

    • D.

      To supply services such as health care to compete with private sector firms

    Correct Answer
    D. To supply services such as health care to compete with private sector firms
    Explanation
    Government intervention in business activity is often justified in order to correct market failures and promote public welfare. The other three options listed are valid reasons for government intervention as they address market failures and protect the interests of consumers and the environment. However, providing services such as healthcare to compete with private sector firms is not a valid reason for government intervention in business activity. This is because the government's role in providing healthcare should be focused on ensuring access to healthcare services for all citizens, rather than competing with private sector firms.

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  • 32. 

    Fiscal policy is about:

    • A.

      Increasing the level of aggregate demand in an economy

    • B.

      Using a central bank to alter interest rates

    • C.

      Taxation and government spending policy

    • D.

      Using exchange rates to affect spending in an economy

    Correct Answer
    C. Taxation and government spending policy
    Explanation
    Fiscal policy refers to the use of government taxation and spending policies to influence the overall economy. It involves decisions made by the government regarding how much money to collect through taxes and how much to spend on various programs and services. By adjusting tax rates and government spending, policymakers can stimulate or restrain economic activity, influence aggregate demand, and promote economic growth. This answer correctly identifies taxation and government spending policy as the key components of fiscal policy.

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  • 33. 

    An ethical business would not:

    • A.

      Pay attention to the natural environment

    • B.

      Treat its employees with respect

    • C.

      Pay huge bonuses to its board of directors

    • D.

      Minimise waste

    Correct Answer
    C. Pay huge bonuses to its board of directors
    Explanation
    An ethical business would not pay huge bonuses to its board of directors because it prioritizes fairness and equality. Paying excessive bonuses to the board of directors can be seen as unfair and unjust, especially if it is not based on their actual performance or contribution to the company. It goes against the principle of treating employees, in this case, the directors, with respect and fairness. Ethical businesses focus on creating a positive work environment, valuing their employees, and ensuring that resources are allocated responsibly and equitably.

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  • 34. 

    Gross Domestic Product (GDP) measures:

    • A.

      The level of real incomes in an economy

    • B.

      The amount of production taken place in a country each year

    • C.

      The total value of a country's output during a year

    • D.

      The changes in prices of a representative basket of goods and services

    Correct Answer
    C. The total value of a country's output during a year
    Explanation
    Gross Domestic Product (GDP) is a measure that represents the total value of all goods and services produced within a country's borders during a specific time period, usually a year. It encompasses the value of all final goods and services produced by businesses, government entities, and individuals within the country. GDP is used to gauge the size and growth of an economy, and it provides an indication of the country's overall economic performance.

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  • 35. 

    The central bank in a country has a role in setting the level of:

    • A.

      Government borrowing

    • B.

      Government expenditure

    • C.

      Interest rates

    • D.

      Taxation

    Correct Answer
    C. Interest rates
    Explanation
    The central bank in a country has a role in setting the level of interest rates. This is because the central bank has the authority to control the money supply and influence the cost of borrowing. By adjusting interest rates, the central bank can stimulate or slow down economic activity, control inflation, and promote stability in the financial system. Lower interest rates encourage borrowing and investment, while higher interest rates discourage borrowing and promote saving. Therefore, the central bank plays a crucial role in shaping the overall economic conditions by setting interest rates.

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  • 36. 

    Inflation can be caused by:

    • A.

      A rise in the price of vital imported raw materials

    • B.

      An increase in a nation's productivity

    • C.

      An increase in a country's productive capacity

    • D.

      A fall in business and consumer confidence levels

    Correct Answer
    A. A rise in the price of vital imported raw materials
    Explanation
    Inflation can be caused by a rise in the price of vital imported raw materials. When the cost of these materials increases, it leads to an increase in production costs for businesses. As a result, businesses may pass on these higher costs to consumers in the form of higher prices for goods and services. This increase in prices across the economy is known as inflation.

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  • 37. 

    Which of the following taxes is a direct tax?

    • A.

      Goods and Services Tax

    • B.

      Corporation tax

    • C.

      Import tariffs

    • D.

      Excise duties

    Correct Answer
    B. Corporation tax
    Explanation
    Corporation tax is a direct tax because it is levied directly on the income and profits of corporations. This tax is paid by the corporations themselves and cannot be passed on to consumers or other entities. In contrast, Goods and Services Tax (GST), import tariffs, and excise duties are indirect taxes as they are imposed on goods and services, and can be passed on to consumers through increased prices.

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  • 38. 

    Which of the following could not be used as a fiscal policy instrument?

    • A.

      Reducing income taxes

    • B.

      Reducing interest rates

    • C.

      Increasing government spending on schools

    • D.

      Reducing the government's budget deficit

    Correct Answer
    B. Reducing interest rates
    Explanation
    Reducing interest rates could not be used as a fiscal policy instrument because it falls under the jurisdiction of monetary policy. Fiscal policy refers to the use of government spending and taxation to influence the economy, while monetary policy involves controlling the money supply, interest rates, and credit conditions. Reducing interest rates is a tool used by central banks to stimulate borrowing and spending, which is a part of monetary policy.

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  • 39. 

    Which of the following taxes is least likely to directly affect a business in the hotel and catering industry?

    • A.

      Corporation tax

    • B.

      Income tax

    • C.

      Excise duties

    • D.

      Local government taxes

    Correct Answer
    C. Excise duties
    Explanation
    Excise duties are taxes imposed on specific goods such as alcohol, tobacco, and fuel. These taxes are typically paid by the consumer at the point of purchase. In the hotel and catering industry, businesses may indirectly be affected by excise duties if they sell these goods to customers. However, since the question asks for the tax that is least likely to directly affect a business, excise duties are the correct answer. This is because the burden of paying these taxes falls on the consumer rather than the business itself.

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  • 40. 

    Which is the most likely result of higher interest rates in an economy?

    • A.

      An increase in the volume of exports

    • B.

      Higher levels of investment

    • C.

      Weakened consumer spending

    • D.

      More applications for bank loans

    Correct Answer
    C. Weakened consumer spending
    Explanation
    Higher interest rates in an economy can lead to weakened consumer spending. When interest rates are high, borrowing becomes more expensive, which discourages consumers from taking out loans to make purchases. This can result in decreased consumer spending as individuals may choose to save money or postpone large purchases. Additionally, higher interest rates can also increase the cost of existing debt, such as credit card balances or mortgages, further limiting consumers' ability to spend.

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  • 41. 

    If the government wished to stimulate economic growth, which policy would it be most likely to increase?

    • A.

      Government spending

    • B.

      Income tax

    • C.

      Interest rates

    • D.

      Exchange rates

    Correct Answer
    A. Government spending
    Explanation
    Increasing government spending is a policy that can stimulate economic growth. When the government spends more on infrastructure projects, education, healthcare, or other areas, it injects money into the economy. This increased spending creates demand for goods and services, which in turn leads to increased production and job creation. Additionally, government spending can also have a multiplier effect, as the money spent by the government circulates through the economy, creating further economic activity. Therefore, increasing government spending is a common approach used by governments to stimulate economic growth.

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  • 42. 

    Which of the following is not a stage in the business cycle (economic trade cycle)?

    • A.

      Boom

    • B.

      Recession

    • C.

      Recovery

    • D.

      Decline

    Correct Answer
    D. Decline
    Explanation
    The business cycle, also known as the economic trade cycle, refers to the fluctuations in economic activity over time. It consists of four stages: boom, recession, recovery, and decline. While boom represents a period of high economic growth, recession signifies a decline in economic activity. Recovery is the stage where the economy starts to improve after a recession. Therefore, the correct answer is "Decline" as it is not a stage in the business cycle but rather a term used to describe a downward trend in economic activity.

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  • 43. 

    In July, 2013 the exchange rate between the NZ$ and US$ was NZ$1 = US$0.55. In December, 2012 it was NZ$1 = US$0.63. It can be said that during this time the New Zealand dollar had:

    • A.

      Not changed in value (the two countries don't use the same currency)

    • B.

      Appreciated around 12%

    • C.

      Depreciated around 12%

    • D.

      Depreciated around 9%

    Correct Answer
    C. Depreciated around 12%
    Explanation
    During the given time period, the exchange rate between the NZ$ and US$ decreased from NZ$1 = US$0.63 to NZ$1 = US$0.55. This means that the value of the New Zealand dollar decreased in relation to the US dollar. To calculate the percentage change, we can use the formula: (new value - old value) / old value * 100. Applying this formula, we get (0.55 - 0.63) / 0.63 * 100 = -0.08 / 0.63 * 100 ≈ -12.7%. Therefore, it can be said that the New Zealand dollar depreciated around 12% during this time.

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  • 44. 

    Which of the following is not considered to be an external shock?

    • A.

      An oil crisis raising the costs of production for most industries

    • B.

      The outbreak of war

    • C.

      Financial and cash flow problems harming international expansion plans

    • D.

      Higher than expected unemployment causing a fall in domestic sales

    Correct Answer
    C. Financial and cash flow problems harming international expansion plans
    Explanation
    Financial and cash flow problems harming international expansion plans are not considered to be an external shock because they are internal factors that affect a company's ability to expand internationally. External shocks are unexpected events that occur outside of a company's control, such as an oil crisis, war outbreak, or higher than expected unemployment. These events can have a significant impact on the economy and industries as a whole. However, financial and cash flow problems are internal issues that arise from the company's own financial management and decisions.

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  • 45. 

    An increase in the level of unemployment is an example of:

    • A.

      Demographic change

    • B.

      Economic change

    • C.

      Social change

    • D.

      Political change

    Correct Answer
    B. Economic change
    Explanation
    An increase in the level of unemployment is an example of economic change because it directly affects the economy. When there is a higher number of unemployed individuals, it indicates a decline in job opportunities and a potential decrease in consumer spending. This can lead to a decrease in economic growth and overall economic stability. Unemployment rates are often used as a key indicator of the health of an economy and can have significant impacts on various economic factors such as inflation, government spending, and business profitability.

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  • 46. 

    Employment practices that take a more positive attitude towards women in terms of pay and promotional opportunities is an example of:

    • A.

      Economic change

    • B.

      Demographic change

    • C.

      Social change

    • D.

      Political change

    Correct Answer
    C. Social change
    Explanation
    The employment practices that take a more positive attitude towards women in terms of pay and promotional opportunities reflect a shift in societal norms and values. This indicates a change in the way society perceives and values gender equality and women's rights. It signifies a move towards creating a more inclusive and fair workplace environment, where women are given equal opportunities and recognition. This change is not primarily driven by economic, demographic, or political factors, but rather by a broader social transformation towards gender equality.

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  • 47. 

    Higher economic growth is most likely to be achieved if their is significantly lower:

    • A.

      Deflation

    • B.

      Inflation

    • C.

      Consumption

    • D.

      Unemployment

    Correct Answer
    D. Unemployment
    Explanation
    Higher economic growth is most likely to be achieved if there is significantly lower unemployment. When unemployment is low, it indicates that more people are employed and contributing to the economy. This leads to increased consumption, as employed individuals have more income to spend. Increased consumption stimulates economic growth as businesses experience higher demand for goods and services. Additionally, lower unemployment reduces the burden on social welfare programs and increases tax revenues, which can be reinvested in the economy. Overall, lower unemployment creates a positive cycle of economic growth and prosperity.

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  • 48. 

    Calculate the unemployment rate in a country with 60 million people, of which 30 million are employed and 2 million are unemployed:

    • A.

      3.33%

    • B.

      5.33%

    • C.

      6.25%

    • D.

      6.67%

    Correct Answer
    C. 6.25%
  • 49. 

    In a country with 60 million people, of which 30 million are employed and 2 million are unemployed, what is the number of people in the labor force?

    • A.

      28 million

    • B.

      30 million

    • C.

      32 million

    • D.

      60 million

    Correct Answer
    C. 32 million
    Explanation
    In this scenario, the labor force refers to the total number of people who are employed or actively seeking employment. The question states that there are 30 million employed individuals and 2 million unemployed individuals. Therefore, the number of people in the labor force would be the sum of these two groups, which is 32 million.

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  • 50. 

    A hike in interest rates, all other things remaining constant, will automatically decrease:

    • A.

      Disposable income

    • B.

      Discretionary income

    • C.

      Nominal income

    • D.

      Real income

    Correct Answer
    B. Discretionary income
    Explanation
    When interest rates increase, it becomes more expensive for individuals and businesses to borrow money. This leads to a decrease in discretionary income, which is the income available to spend or save after paying for necessary expenses such as taxes, bills, and debt repayments. As borrowing costs rise, people have less money left over for discretionary spending, such as entertainment, vacations, or luxury items. Therefore, a hike in interest rates decreases discretionary income.

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Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Mar 22, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Jul 11, 2012
    Quiz Created by
    Catherine Halcomb
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