Mabstac1

73 Questions | Total Attempts: 23

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Mabstac1

Mabstac1


Questions and Answers
  • 1. 
    • A. 

      A: Sell domestic currency in the foreign exchange market.

    • B. 

      B: Buy domestic currency in the foreign exchange market.

    • C. 

      C: Sell foreign currency in the foreign exchange market.

    • D. 

      D: Increase domestic interest rates.

  • 2. 
    If the US dollar declines in value relative to the currencies of many of its trading partners, the likely result is that
    • A. 

      A: Foreign currencies will depreciate against the dollar.

    • B. 

      B: The US trade deficit will worsen.

    • C. 

      C: US exports will tend to increase.

    • D. 

      D: US imports will tend to increase.

  • 3. 
    Which of the following changes would create pressure for the Japanese yen to appreciate relative to the US dollar?
    • A. 

      A: An increase in incomes in Japan.

    • B. 

      B: A change in US tastes in favor of Japanese goods.

    • C. 

      C: A decrease in US incomes.

    • D. 

      D: A change in Japanese tastes in favor of US goods.

  • 4. 
    The real risk-free rate
    • A. 

      A: Includes a default premium.

    • B. 

      B: Assumes that inflation is expected.

    • C. 

      C: Includes a liquidity premium.

    • D. 

      D: Is the basic component of interest.

  • 5. 
    Exchange rates are determined by
    • A. 

      A: Each industrial country's government.

    • B. 

      B: The International Monetary Fund.

    • C. 

      C: Supply and demand in the foreign exchange market.

    • D. 

      D: Exporters and importers of manufactured goods.

  • 6. 
    Implementation of a government’s monetary policy in most major industrial countries is managed by
    • A. 

      A: The central bank.

    • B. 

      B: The national government.

    • C. 

      C: Commercial banks.

    • D. 

      D: Bond market traders.

  • 7. 
    An expansionary <List A> policy will have <List B> effect on net exports.     List A List Bs A. Fiscal A negative B. Fiscal No C. Monetary A negative D. Monetary No
    • A. 

      A:A

    • B. 

      B:B

    • C. 

      C:C

    • D. 

      D:D

  • 8. 
    If the value of the US dollar in foreign currency markets changes from $1 = 6 marks to $1 = 4 marks,
    • A. 

      A: The German mark has depreciated against the dollar.

    • B. 

      B: German imported products in the US will become more expensive.

    • C. 

      C: US tourists in Germany will find their dollars will buy more German products.

    • D. 

      D: US exports to Germany should decrease.

  • 9. 
    The US dollar has a free-floating exchange rate.  When the dollar has fallen considerably in relation to other currencies, the
    • A. 

      A: Trade account in the US balance of payments is neither in a deficit nor in a surplus because of the floating exchange rates.

    • B. 

      B: Capital account in the US balance of payments is neither in a deficit nor in a surplus because of the floating exchange rates.

    • C. 

      C: Fall in the dollar's value cannot be expected to have any effect on the US trade balance.

    • D. 

      D: Cheaper dollar helps US exporters of domestically produced goods.

  • 10. 
    If the exchange rate has changed from 1 US dollar being worth 5 French francs to a rate of 1 US dollar being worth 5.5 French francs,
    • A. 

      A: The US dollar has appreciated by 10%.

    • B. 

      B: The US dollar has depreciated by 10%.

    • C. 

      C: The French franc has appreciated by 20%.

    • D. 

      D: The French franc has depreciated by 20%.

  • 11. 
    When analyzing a country’s balance of payments accounts, the
    • A. 

      A: "Current account" refers only to merchandise exports and imports.

    • B. 

      B: "Current account" and "trade balances" are the same.

    • C. 

      C: "Capital account" refers to the transactions related to the international movement of financial capital.

    • D. 

      D: Country will be in financial jeopardy unless each component in the balance of payments accounts balances at the end of the year.

  • 12. 
    X and Y are complementary products.  If the price of product Y increases, the immediate impact on product X is that its
    • A. 

      A: Price will decrease.

    • B. 

      B: Quantity demanded will decrease.

    • C. 

      C: Quantity supplied will decrease.

    • D. 

      D: Price, quantity demanded, and supplies will remain unchanged.

  • 13. 
    Tower Inc. sells a product that is a close substitute for a product offered by Westco.  Historically, management of Tower has observed a coefficient of cross-elasticity of 1.5 between the two products.  If management of Tower anticipates a 5% increase in price by Westco, how would this action by Westco’s management be expected to affect the demand for Tower’s product?
    • A. 

      A: A 5% increase.

    • B. 

      B: A 5% decrease.

    • C. 

      C: A 7.5% increase.

    • D. 

      D: A 7.5% decrease.

  • 14. 
    Lyle Corporation has sold a large quantity of goods to a Japanese company on a 90-day account payable in Japanese yen.  If management of Lyle is concerned about the transaction risk related to changes in the value of the yen, how might management hedge this risk?
    • A. 

      A: Sell yen using a forward contract for delivery in 90 days.

    • B. 

      B: Buy yen using a forward contract for delivery in 90 days.

    • C. 

      C: Lend yen for repayment in 90 days.

    • D. 

      D: Purchase a long position in the futures market for delivery of yen in 90 days.

  • 15. 
    Which of the following activities involves collecting data about all segments of the firm’s general environment to understand the effects of economic changes on the firm’s industry?
    • A. 

      A: Monitoring.

    • B. 

      B: Assessing.

    • C. 

      C: Forecasting.

    • D. 

      D: Scanning.

  • 16. 
    Which of the following management techniques would likely be most important to a firm in a purely competitive market?
    • A. 

      A: Competitor analysis.

    • B. 

      B: Target market analysis.

    • C. 

      C: Supply chain management.

    • D. 

      D: Price-elasticity analysis.

  • 17. 
    Which of the following is not accurate about product differentiation?
    • A. 

      A: Differentiation can only be perceived by the consumer based on brand name.

    • B. 

      B: Differentiation can be based on service.

    • C. 

      C: Differentiation can be achieved by market segmentation.

    • D. 

      D: Differentiation is always related to the cost of producing the product.

  • 18. 
    The local video store’s business increased by 12% after the movie theater raised its prices from $6.50 to $7.00.  Thus, relative to movie theater admissions, videos are
    • A. 

      A: Substitute goods.

    • B. 

      B: Superior goods.

    • C. 

      C: Complementary goods.

    • D. 

      D: Public goods.

  • 19. 
    All of the following are complementary goods except
    • A. 

      A: Margarine and butter.

    • B. 

      B: Cameras and rolls of film.

    • C. 

      C: VCRs and video cassettes.

    • D. 

      D: Razors and razor blades.

  • 20. 
    The movement along the demand curve from one price-quantity combination to another is called a(n)
    • A. 

      A: Change in demand.

    • B. 

      B: Shift in the demand curve.

    • C. 

      C: Change in the quantity demanded.

    • D. 

      D: Increase in demand.

  • 21. 
    If a group of consumers decide to boycott a particular product, the expected result would be
    • A. 

      A: An increase in the product price to make up lost revenue.

    • B. 

      B: A decrease in the demand for the product.

    • C. 

      C: An increase in product supply because of increased availability.

    • D. 

      D: That demand for the product would become completely inelastic.

  • 22. 
    In a competitive market for labor in which demand is stable, if workers try to increase their wage,
    • A. 

      A: Employment must fall.

    • B. 

      B: Government must set a maximum wage below the equilibrium wage.

    • C. 

      C: Firms in the industry must become smaller.

    • D. 

      D: Product supply must decrease.

  • 23. 
    The law of diminishing marginal utility states that
    • A. 

      A: Marginal utility will decline as a consumer acquires additional units of a specific product.

    • B. 

      B: Total utility will decline as a consumer acquires additional units of a specific product.

    • C. 

      C: Declining utilities cause the demand curve to slope upward.

    • D. 

      D: Consumers' wants diminish with the passage of time.

  • 24. 
    A supply curve illustrates the relationship between
    • A. 

      A: Price and quantity supplied.

    • B. 

      B: Price and consumer tastes.

    • C. 

      C: Price and quantity demanded.

    • D. 

      D: Supply and demand.

  • 25. 
    An increase in the market supply of beef would result in a(n)
    • A. 

      A: Increase in the price of beef.

    • B. 

      B: Decrease in the demand for beef.

    • C. 

      C: Increase in the price of pork.

    • D. 

      D: Increase in the quantity of beef demanded.

  • 26. 
    If both the supply and the demand for a good increase, the market price will
    • A. 

      A: Rise only in the case of an inelastic supply function.

    • B. 

      B: Fall only in the case of an inelastic supply function.

    • C. 

      C: Not be predictable with only these facts.

    • D. 

      D: Rise only in the case of an inelastic demand function.

  • 27. 
    Marginal revenue is
    • A. 

      A: Equal to price in monopolistic competition.

    • B. 

      B: The change in total revenue associated with increasing prices.

    • C. 

      C: Greater than price in pure competition.

    • D. 

      D: The change in total revenue associated with producing and selling one more unit.

  • 28. 
    This question is based on the following information.   Total units of product Average fixed cost Average variable cost Average total cost 6 $15.00 $25.00 $40.00 7 12.86 24.00 36.86 8 11.25 23.50 34.75 9 10.00 23.75 33.75   The total cost of producing seven units is
    • A. 

      A: $90.02

    • B. 

      B: $168.00

    • C. 

      C: $258.02

    • D. 

      D: $280.00

  • 29. 
    This question is based on the following information.   Total units of product Average fixed cost Average variable cost Average total cost 6 $15.00 $25.00 $40.00 7 12.86 24.00 36.86 8 11.25 23.50 34.75 9 10.00 23.75 33.75   The marginal cost of producing the ninth unit is
    • A. 

      A: $23.50

    • B. 

      B: $23.75

    • C. 

      C: $25.75

    • D. 

      D: $33.75

  • 30. 
    In the long run, a firm may experience increasing returns due to
    • A. 

      A: Law of diminishing returns.

    • B. 

      B: Opportunity costs.

    • C. 

      C: Comparative advantage.

    • D. 

      D: Economies of scale.

  • 31. 
    Which on of the following is not a key assumption of perfect competition?
    • A. 

      A: Firms sell a homogeneous product.

    • B. 

      B: Customers are indifferent about which firm they buy from.

    • C. 

      C: The level of a firm's output is small relative to the industry's total output.

    • D. 

      D: Each firm can price its product above the industry price.

  • 32. 
    Economic markets that are characterized by monopolistic competition have all of the following characteristics except
    • A. 

      A: One seller of the product.

    • B. 

      B: Economies or diseconomies of scale.

    • C. 

      C: Advertising.

    • D. 

      D: Heterogeneous products.

  • 33. 
    The distinguishing characteristic of oligopolistic markets is
    • A. 

      A: A single seller of a homogeneous product with no close substitute.

    • B. 

      B: A single seller of a heterogeneous product with no close substitute.

    • C. 

      C: Lack of entry and exit barriers in the industry.

    • D. 

      D: Mutual interdependence of firm pricing and output decisions.

  • 34. 
    The trough of a business cycle is generally characterized by
    • A. 

      A: Shortages of essential raw materials and rising costs.

    • B. 

      B: Increasing purchasing power and increasing capital investments.

    • C. 

      C: Rising costs and an unwillingness to risk new investments.

    • D. 

      D: Unused productive capacity and an unwillingness to risk new investments.

  • 35. 
    Which of the following may provide a leading indicator of a future increase in gross domestic product?
    • A. 

      A: A reduction in the money supply.

    • B. 

      B: A decrease in the issuance of building permits.

    • C. 

      C: An increase in the timliness of delivery by vendors.

    • D. 

      D: An increase in the average hours worked per week of production workers.

  • 36. 
    If a government were to use only fiscal policy to stimulate the economy from a recession, it would
    • A. 

      A: Raise consumer taxes and increase government spending.

    • B. 

      B: Lower business taxes and government spending.

    • C. 

      C: Increase the money supply and increase government spending.

    • D. 

      D: Lower consumer taxes and increase government spending.

  • 37. 
    The discount rate of the Federal Reserve System is
    • A. 

      A: The specified percentage of a commercial bank's deposit liabilities that must be deposited in the central bank.

    • B. 

      B: The rate that the central bank charges for loans granted to commercial banks.

    • C. 

      C: The rate that commercial banks charge for loans granted to the public.

    • D. 

      D: The ratio of excess reserves to legal reserves that are deposited in the central bank.

  • 38. 
    A period of rising inflation
    • A. 

      A: Increases the price level, which benefits those who are entitled to receive specific amounts of money.

    • B. 

      B: Enhances the positive relationship between the price level and the purchasing power of money.

    • C. 

      C: Will not be affected by contracts that include the indexing of payments.

    • D. 

      D: Increases the price level, which is negatively related to the purchasing power of money.

  • 39. 
    Greater barriers to collusion exist for oligopolistic firms when
    • A. 

      A: The firms' costs are more similar.

    • B. 

      B: There are fewer firms in the industry.

    • C. 

      C: General economic conditions are recessionary.

    • D. 

      D: The firms' products are standardized.

  • 40. 
    Which of the following is a direct effect of imposing a protective tariff on an imported product?
    • A. 

      A: Lower domestic prices on the imported item.

    • B. 

      B: Lower domestic consumption of the item.

    • C. 

      C: Reduced domestic production of the item.

    • D. 

      D: Higher sales revenues for foreign producers of the item.

  • 41. 
    Which of the following instruments of monetary policy is the most important means by which the money supply is controlled?
    • A. 

      A: Changing the reserve ratio.

    • B. 

      B: Open market operations.

    • C. 

      C: Manipulation of government spending.

    • D. 

      D: Changing the discount rate.

  • 42. 
    A multinational company operates a production facility in country A and a distribution outlet in country B.  The tax rates are 40% in country A and 50% in country B.  The production facility sells the goods to the distribution outlet, both of which are wholly owned by the multinational company.  The internal sale of goods occurs at a “transfer” price set by the multinational company.  Assuming no nontax considerations and no interference from the tax authorities of the two countries, the company should
    • A. 

      A: Maximize the transfer price.

    • B. 

      B: Minimize the transfer price.

    • C. 

      C: Establish a transfer price that results in the same profit margin for both operations.

    • D. 

      D: Use a transfer price based on the market price for the product that other producers charge.

  • 43. 
    In a purely competitive market
    • A. 

      A: There are a small number of sellers who make interdependent pricing and output decisions.

    • B. 

      B: There are a relatively large number of sellers who produce differentiated products.

    • C. 

      C: The firm is the industry.

    • D. 

      D: A very large number of firms produce a standardized product.

  • 44. 
    An individual exhibiting the following savings and consumption pattern has a marginal propensity to consume of   Year Income level Savings Consumption 1 $10,000 $2,000 $8,000 2 $15,000 $5,000 $10,000
    • A. 

      A: 0.40

    • B. 

      B: 0.60

    • C. 

      C: 0.67

    • D. 

      D: 0.80

  • 45. 
    Which of the following is not a characteristic of a purely competitive market?
    • A. 

      A: Differentiated products.

    • B. 

      B: No significant control over product price exerted by individual firms.

    • C. 

      C: No barriers to entry for new firms.

    • D. 

      D: A very large number of producing firms.

  • 46. 
    Some economic indicators lead the economy into a recovery or recession, and some lag it.  An example of a lag variable would be
    • A. 

      A: Average duration of unemployment.

    • B. 

      B: Orders for consumer and producer goods.

    • C. 

      C: Housing starts.

    • D. 

      D: Consumer expectations.

  • 47. 
    The two main variables that contribute to increases in a nation’s real gross domestic product (GDP) are labor productivity and
    • A. 

      A: Definition of the labor force.

    • B. 

      B: Inflation rate.

    • C. 

      C: Quality of output.

    • D. 

      D: Total worker hours.

  • 48. 
    In the law of comparative advantage, the country which should produce a specific product is determined by
    • A. 

      A: Opportunity costs.

    • B. 

      B: Profit margins.

    • C. 

      C: Economic order quantities.

    • D. 

      D: Tariffs.

  • 49. 
    In the short run, a severe hurricane creates an immediate strong increase in demand for roofers.  Some roofers in other parts of the country are then attracted to the disaster area.  Assume that in the long run the increase in demand still exceeds the increase in supply.  Incorporating these facts in an analysis, the price for roofers in the short run increases, while in the long run the price will
    • A. 

      A: Decrease below the original price.

    • B. 

      B: Return to the original price.

    • C. 

      C: Decrease, but remain above the original price.

    • D. 

      D: Continue to increase.

  • 50. 
    Which competition form describes an industry that has a relatively large number of firms operating noncollusively and producing differentiated products?
    • A. 

      A: Pure competition.

    • B. 

      B: Pure monopoly.

    • C. 

      C: Monopolistic competition.

    • D. 

      D: Oligopoly.

  • 51. 
    An individual receives an income of $3,000 per month, and spends $2,500.  An increase in income of $500 per month occurs, and the individual spends $2,800.  The individual’s marginal propensity to save is
    • A. 

      A: 0.2

    • B. 

      B: 0.4

    • C. 

      C: 0.6

    • D. 

      D: 0.8

  • 52. 
    When maximizing utility in economics, what is being maximized?
    • A. 

      A: Profits.

    • B. 

      B: Satisfaction.

    • C. 

      C: Costs.

    • D. 

      D: Elasticity.

  • 53. 
    Companies can reduce the potential loss from host-government expropriation of their foreign subsidiaries by
    • A. 

      A: Financing the subsidiary with local-country capital.

    • B. 

      B: Structuring operations so that the subsidiary has value as a stand-alone company.

    • C. 

      C: Reducing the cost of capital to reflect political risk when assessing foreign investment opportunities.

    • D. 

      D: Selling products in the local country.

  • 54. 
    Which of the following types of merger is most likely to contribute to the formation of an oligopoly?
    • A. 

      A: Horizontal.

    • B. 

      B: Conglomerate.

    • C. 

      C: Divestiture.

    • D. 

      D: Vertical.

  • 55. 
    The rate of unemployment caused by changes in the composition of employment opportunities over time is referred to as the
    • A. 

      A: Frictional unemployment rate.

    • B. 

      B: Cyclical unemployment rate.

    • C. 

      C: Structural unemployment rate.

    • D. 

      D: Full employment unemployment rate.

  • 56. 
    Disposable income is calculated as
    • A. 

      A: Gross national product minus capital cost allowance.

    • B. 

      B: Net national product minus indirect business taxes.

    • C. 

      C: Personal income minus transfer payments.

    • D. 

      D: Personal income minus personal taxes.

  • 57. 
    A company has a foreign-currency-dominated trade payable, due in 60 days.  In order to eliminate the foreign exchange risk associated with the payable, the company could
    • A. 

      A: Sell foreign currency forward today.

    • B. 

      B: Wait 60 days and pay the invoice by purchasing foreign currency in the spot market at that time.

    • C. 

      C: Buy foreign currency forward today.

    • D. 

      D: Borrow foreign currency today, convert it to domestic currency on the spot market, and invest the funds in a domestic bank deposit until the invoice payment date.

  • 58. 
    For a given level of tax collections, prices, and interest rates, a decrease in government purchases will result in a(n)
    • A. 

      A: Increase in aggregate demand.

    • B. 

      B: Increase in aggregate supply.

    • C. 

      C: Decrease in aggregate demand.

    • D. 

      D: Decrease in aggregate supply.

  • 59. 
    Assuming that the real rate of interest is the same in both countries, if country A has a higher nominal interest rate than country B, then the currency of country A will likely be selling at a
    • A. 

      A: Forward discount relative to the currency of country B.

    • B. 

      B: Forward premium relative to the currency of country B.

    • C. 

      C: Spot discount relative to the currency of country B.

    • D. 

      D: Spot premium relative to the currency of country B.

  • 60. 
    The trough of a business cycle is generally characterized by:
    • A. 

      A. Shortages of essential raw materials and rising costs.

    • B. 

      B. Increasing purchasing power and increasing capital investments.

    • C. 

      C. Unused productive capacity and an unwillingness to risk investments.

    • D. 

      D. Declining purchasing power and unused productive capacity.

  • 61. 
    During a recess ion:
    • A. 

      A. Output (real GOP) will be increasing.

    • B. 

      B. The natural rate of unemployment will increase dramatically.

    • C. 

      C. Potential output will exceed actual output.

    • D. 

      D. Actual output will exceed potential output.

  • 62. 
    A recession can be caused by:
    • A. 

      A. An increase in aggregate demand.

    • B. 

      B. A decrease in aggregate supply.

    • C. 

      C. A decrease in aggregate demand.

    • D. 

      D. Both "b" and "e".

  • 63. 
    A period during which real GOP is rising and unemployment is falling is called a(n):
    • A. 

      A. Recession.

    • B. 

      B. Peak.

    • C. 

      C. Expansion.

    • D. 

      D. Trough.

  • 64. 
    Which of the following might be considered the most expansionary set of fiscal policies?
    • A. 

      A. Increase government purchases, increase in taxes.

    • B. 

      B. Increase government purchases, decrease in taxes.

    • C. 

      C. Decrease in taxes, increase in the money supply.

    • D. 

      D. Increase in government purchases, increase in the money supply.

  • 65. 
    An increase in government spending will tend to cause:
    • A. 

      A. Real GOP to fall and unemployment to rise.

    • B. 

      B. Real GOP to rise and unemployment to fall.

    • C. 

      C. Real GOP to rise and unemployment to rise.

    • D. 

      D. Real GOP to fall and unemployment to fall.

  • 66. 
    An increase in the personal income tax will tend to cause:
    • A. 

      A. Real GOP to fall and unemployment to rise.

    • B. 

      B. Real GOP to rise and unemployment to fall.

    • C. 

      C. Real GOP to rise and unemployment to rise.

    • D. 

      D. Real GOP to fall and unemployment to fall.

  • 67. 
    Which one of the following most accurately describes the normal sequence of a business cycle?
    • A. 

      A. Expansion, contraction , trough, and peak.

    • B. 

      B. Expansion, peak, contraction , and trough.

    • C. 

      C. Peak, contraction, expansion , and trough.

    • D. 

      D. Trough, contraction, expansion, and peak.

  • 68. 
    Which of the following is not likely to cause a rightward shift in the aggregate demand curve?
    • A. 

      A. An increase in wealth.

    • B. 

      B. An increase in the level of real interest rates.

    • C. 

      C. An increase in government spending.

    • D. 

      D. An increase in the general level of confidence about the economic outlook.

  • 69. 
    Within the framework of the aggregate demand/aggregate supply model, an increase in short run aggregate supply will cause:
    • A. 

      A. Real output to expand and the price level to fall.

    • B. 

      B. Real output to decline and the price level to rise.

    • C. 

      C. Real output to expand and the price level to rise.

    • D. 

      D. Real output to decline and the price level to fall.

  • 70. 
    Which one of the following is most likely to accompany a reduction in aggregate demand?
    • A. 

      A. An increase in the price level.

    • B. 

      B. A decrease in employment.

    • C. 

      C. An increase in real GDP.

    • D. 

      D. A decrease in the unemployment rate.

  • 71. 
    If an economy is currently experiencing both full employment and price stability, a major tax reduction will probably cause:
    • A. 

      A. An increase in the unemployment rate.

    • B. 

      B. An acceleration in the inflation rate, unless government expenditures are also reduced.

    • C. 

      C. No change in real GOP or the price level.

    • D. 

      D. A decrease in consumption.

  • 72. 
    If the U.S. dollar increases in value relative to the other major currencies, aggregate demand should:
    • A. 

      A. Increase as U.S. goods become more attractive overseas.

    • B. 

      B. Decrease as U.S. goods become less attractive overseas.

    • C. 

      C. Depends on supply of foreign goods.

    • D. 

      D. Not necessarily change.

  • 73. 
    Your company trades internationally and has strong import/export business.  The company’s exports are increasing and the dollar is getting stronger in relation to the company’s trading partners.  In the midst of all this good news, profitability is falling. In a memorandum to stockholders, explain why this might be happening.