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1. It is necessary to include a balancing item in the balance of payments accounts in order to

Balance the current and capital accounts

Ensure that balance of payments equilibrium is achieved

Record accurately changes in the balance of official reserves

Compensate for mistakes made when recording current and capital flows

2. All of the following are elements of a supply side policy except which one?

Reductions in the marginal rates of taxation.

Increased entitlement to social security and unemployment benefits.

Increased public expenditure on education and training.

Privatization of public sector industries.

3. A country has a trade deficit. The demand for its imports and exports are both price elastic.

All of the following would lead to an a reduction in the country's trade deficit except which one?

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.

4. All of the following items would appear as a credit on the current account of a country's balance of payments accounts except which one?

Interest payments on financial assets held overseas.

Exports of manufactured goods.

Outflows of capital.

Expenditure by visiting foreign tourists.

5. In a fully employed economy, which one of the following would lead to demand pull inflation?

A reduction in the rate of income tax

A rise in value added tax

An increase in the world price of oil

A rise in interest rates

6. Which of the following best defines a fiscal policy?

A policy that increases government spending to increase national income

A policy which seeks to influence the economy through manipulation of government spending and taxation

A policy aimed at influencing the level of aggregate demand in the economy

A policy which controls inflation by controlling the amount of money in the economy

7. Which one of the following policies to correct a balance of payments current account deficit is an example of an expenditure reducing policy?

Depreciation of the currency.

The imposition of an import tax.

Increased income tax.

The use of import quotas.

8. Which global financial institution is responsible for making long term loans to assist developing countries to invest and develop?

The IMF

The World Bank

The World Trade Organization

The G20

9. All of the following are typical features of the downswing phase of the trade cycle except one.

Which ONE is the exception?

A rise in the level of unemployment

A fall in the rate of inflation

The government budget balance moving towards a deficit

The balance of payments current account moving towards a deficit

10. If an economy went into a recession, which industry would experience the largest proportionate fall in sales, output and employment?

Retail supermarkets

Food processing industry

Petrol retailing

Luxury good manufacturers

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11. Which of the following would not be a reason for a government to impose a quota on imports?

To plan the orderly decline of industries that have lost comparative advantage

To prevent dumping

To protect infant and strategic industries

To prevent completely the country's citizens consuming an imported demerit good

12. CORRECT TEXT

A business is contemplating investing in a new project with a lifespan of three years and a capital cost of $100,000.

The expected net cash flows from the project are as follows:

Year 1 $35,000

Year 2 $50,000

Year 3 $40,000

The cost of capital to the business is 10%

The net present value of the project is: $

13. All of the following are objectives of not-for-profit organizations except one.

Which ONE is the exception?

Value for money

Maximization of financial surpluses

Serving the public interest effectively

Efficient use of physical and human resources

14. Which ONE of the following is regarded as a general characteristic of an organization?

Controlled performance of its activities

Social goals towards society

Collective goals towards society

Social arrangement of people

15. A government might increase its budget deficit in order to reduce

Demand-deficient or cyclical unemployment

Frictional unemployment

Technological unemployment

Classical or real-wage unemployment

16. Select the best definition of a regressive tax from the options below:

A tax which rises proportionately with income

A tax which rises more than proportionately with income

A tax which rises less than proportionately with income

A tax on expenditure

17. All of the following are early indicators of a recovery from a recession except which one?

A rise in business confidence.

An acceleration in the growth of the money supply.

A fall in the level of net personal debt.

An increase in the number of unfilled vacancies.

18. If a government adopted a fiscal policy of cutting its budget deficit, the aggregate demand and supply model shows that the result would be:

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

19. Which of the following would lead to an increase in a firm's share price?

Management announces that profits are still rising in line with the forecasts in its published 5 year plan

Management announces that profits will be higher than had previously been forecast

A rise in the rate of interest available from investing in government securities

Management announces that new laws on working conditions have forced them to close a profitable factory earlier than had been expected

20. Which of the following is an invisible import for a country?

Expenditure in its shops by foreign diplomats based in the country

The country's contribution to foreign aid

A foreign company signing a contract guaranteeing to invest in a new factory in the country

Repayment of an IMF loan by the country's government

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21. All of the following items would appear as a credit on the current account of a country's balance of payments accounts except which one?

Interest payments on financial assets held overseas.

Exports of manufactured goods.

Outflows of capital.

Expenditure by visiting foreign tourists.

22. Part of a country's unemployment figures will consist of people moving between jobs.

Which type of unemployment is this?

Structural unemployment

Cyclical (or demand deficient) unemployment

Frictional unemployment

Real wage unemployment

23. As the process of globalization increases, typical businesses will

Depend more and more on their domestic markets.

Have to raise more capital from internal sources.

Have less need to increase their international competitiveness.

Be more and more affected by changes in exchange rates.

24. CORRECT TEXT

A bond has a coupon rate of 7%, a nominal value of $100 and a market price of $140

The percentage running yield is %

25. Which of the following best defines “aggregate supply”?

The stock of output available for sale in an economy

The full employment level of output of the economy

The flow of goods and services produced by an economy during the year

The level of prices at which output can be sold in an economy

26. Which global financial institution is responsible for providing stabilization funding to assist developed and developing countries with short term borrowing needs and needs for foreign currency?

The IMF

The World Bank

The World Trade Organization

The G20

27. A country is a net oil exporter and the demand for oil overseas is price inelastic. A substantial increase in the world price of oil would tend to

Improve the country's balance of payments on current account

Improve the price competitiveness of manufacturing firms in the country

Cause the country's terms of trade to deteriorate

Increase GDP but not GNP in the country

28. The Phillips curve shows that the government

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.

29. Which of the following is the most likely cause of a demand deficient unemployment (or cyclical unemployment)?

A fall in domestic interest rates

Significantly lower labor costs available in a developing country

Improvement in the terms of trade

Excess aggregate demand in the economy of a trading partner

30. Which of the following is most likely to lead an economy to suffer high unemployment?

Withdrawals exceeding injections

Aggregate demand exceeding aggregate supply

Injections exceeding withdrawals

A fiscal deficit

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31. In a customs union member countries

Meet to agree tariff increases affecting internal trade between themselves

Trade freely with each other and impose their own national restrictions on trade with the rest of the world

Trade freely with each other and accept a common external tariff for trade with the rest of the world

Replace national currencies with a common currency such as the Euro

32. Which of the following is not likely to result from a fall in the rate of interest?

Increased consumption

Increased investment

A higher exchange rate

An increase in aggregate demand

33. An important distinction between a free trade area and a customs union is that

Only a customs union erects a common external tariff

Only a free trade area allows free internal trade in services as well in goods

Only a customs union is an example of a multilateral trading agreement

Only a free trade area involves common economic policies

34. Which ONE of the following would appear as a debit item on a country's balance of payments current account?

Overseas investment by a domestic multinational company

Expenditure in the country by an overseas visitor

A flow of company profits to the parent company based in another country

Payment by an overseas company for services provided in the country

35. The level of national income in the circular flow will remain constant if

injections are greater than withdrawals

injections are equal to withdrawals

injections are equal to savings

injections plus withdrawals are equal to savings plus investment

36. In a recession which ONE of the following would be likely to experience the largest fall in demand for its products?

A manufacturer of industrial machine tools

A chain of supermarket grocery stores

A motor insurance company

A toothpaste manufacturer

37. Which ONE of the following would best indicate that economic growth is taking place?

An increase in:

The economy's output gap

Investment to make good wear and tear of the national capital stock

Investment in human capital

Gross domestic product sustained over a number of years

38. The imposition of a tariff on imported goods by a country's government will result in all of the following except one.

Which ONE is the exception?

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

39. All of the following are features of the process of globalization except which one?

Increased flows of factors of production between economies.

Higher international disparities in rates of return on capital.

Increasing interdependence between economies.

Higher levels of trade in components and semi-finished goods.

40. Which ONE of the following is an External stakeholder in a state-owned energy provider?

The industry regulator

A firm selling equipment to the energy provider

Customers of the energy provider

The government

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41. Oxfam is a charity established to provide aid to the poor.

Which ONE of the following statements about Oxfam is FALSE?

It is a private sector organization

It pursues social goals

It is a not-for-profit organization

It is responsible to its shareholders

42. Which of the following statements about macroeconomic policy objectives is correct?

Governments always regard control of inflation as the most important policy objective

Conflicts between objectives mean that macroeconomic policy can never be regarded as successful

Expanding demand to reduce unemployment may mean that the balance of payments worsens

The pursuit of economic growth inevitably increases unemployment

43. CORRECT TEXT

A business was selling 20,000 units of its product per month at a price of $10. When it lowers its price to $9 it finds that its sales rise to 24,000 units per month.

The price elasticity of demand for this firm's product is

44. Which of the following economic conditions is likely to lead to demand-pull inflation?

An increase in interest rates and a rise in the world price of oil

An increase in government spending and firms operating at full capacity

Increased monopoly power in goods and labor markets

A worsening balance of payments deficit and a rising exchange rate

45. Which ONE of the following best explains the statement 'In not for profit organizations money is a constraint and not a goal'?

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

46. If in a boom a government adopted a contractionary (restrictive) monetary policy, a typical business would expect to experience:

i. Higher interest payments on its bank borrowing.

ii. Falling credit based sales.

iii. Higher income and corporate taxes.

iv. Lower sales to government agencies.

v. Difficulties in securing working capital

vi. Higher prices for imported components.

(i), (ii) and (vi) only

(i), (ii) and (v) only

(ii), (iii) and (iv) only

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

47. A country's gross national product (GNP) will be higher than gross domestic product (GDP) if:

indirect taxes are greater than government subsidies

there is a net inflow of factor payments on the balance of payments

the country's imports are greater than its exports

government tax income is greater than government expenditure

48. In the aggregate supply and demand model, a significant rise in the cost of energy for industry would lead to the

Aggregate supply curve moving to the right

Aggregate supply curve moving to the left

Aggregate demand curve moving to the right

Aggregate demand curve moving to the left

49. Which one of the following would raise both national income and disposable income ?

An increase in transfer payments

A reduction in rates of personal income tax

An increase in business profits

A rise in the rates of personal income tax

50. On an aggregate demand and aggregate supply diagram, cost-push inflation is shown by

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

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51. If a country joined an economic union (for example, the European Union) its business sector could benefit from all of the following except which one?

Higher profit margins due to a reduction in transport costs.

Economies of scale as it gained access to a larger market.

Lower input costs as imports from other member states would become cheaper.

Reduced costs as a result of access to a wider supply of factors of production.

52. Which of the following statements about supply-side economics is correct?

Supply-side policies are part of aggregate demand management policies.

Fiscal policy cannot be used as a part of supply-side policy

Supply-side economists always reject the use of policy to expand demand

Supply-side policies are used to improve the economy's efficiency and competitiveness

53. Which ONE of the following is NOT required in calculating the EPS of ABC plc?

The market price of ABC's share

The number of shares ABC has in issue

The most recent earnings after interest and tax of ABC

The dividend payment made to holders of preference shares

54. A surplus on the current account of the balance of payments can be financed by

An inflow of capital on the capital account.

Lending abroad on the capital account.

A fall in the foreign exchange reserves

A surplus on the government budget.

55. Which global institution is concerned with co-coordinating economic policies and agreeing banking and financial regulations?

The IMF

The World Bank

The World Trade Organization

The G20

56. All of the following are regarded as objectives of profit seeking organizations except one.

Which ONE is the exception?

Raising shareholder wealth

Long term growth in sales

Meeting regulatory, accounting and reporting standards

Maximizing profit

57. The equilibrium level of national income in an economy is the level of income at which

Full employment occurs

There is zero inflation

Total planned spending equals the supply of output available

The government's budget and the balance of payments are both exactly balanced

58. CORRECT TEXT

A business has fixed costs of $200. Its total variable costs at different levels of output are as follows:

The business can always sell its output at a price of $100 per unit

The profit maximizing level of output is

59. Which of the following is not taken into account by the discount factor applied to future earnings when calculating shareholder value?

Shareholders rate of time preference for money

The amount of earnings that will be lost as taxation

The amount of risk the investment is subject to

The rate of inflation

60. All of the following would result from a shift from direct to indirect taxes except which one?

An increase in the prices of products due to inflation.

A reduction in the disincentive to work and effort.

A more progressive taxation system.

A shift in the burden of taxation towards lower income groups.

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61. Which of the following would not increase barriers to world trade?

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

62. Which of the following statements about the difference between profit and shareholder wealth is false?

Shareholder wealth considers financial returns over a longer period than profit

Shareholder wealth takes risk into account

Shareholder wealth is a discounted present value of anticipated future earnings but profit is just a short term measure of past earnings

Shareholder wealth influences share prices but profit does not

63. A 'supply-side' economist would recommend that in the long term, a country's unemployment problem should be tackled by

A reduction in the money supply

Income tax cuts to promote labor market incentives

Tax cuts to expand aggregate demand

Increasing the job-seekers allowance and the period for which it can be claimed

64. All of the following are features of an economic union (for example, the European union) except which one?

A fixed exchange rate relative to non union currencies.

Free movement of goods and services between member states.

A common external tariff.

Free movement of factors of production between member states.

65. Which of the following businesses would benefit most from an expansionary monetary policy?

Companies with high levels of borrowing producing consumer durables.

Companies with low levels of borrowing in the supermarket industry.

Cash rich companies producing consumer durable goods.

Low geared companies whose inputs are mainly imported.

66. Identify from the list below the financial instrument that is not a method of government borrowing:

Cash (i.e. notes and coins)

Taxation

Contributions to state-provided pensions

Government bonds

67. The consequences of globalization for national economies include all of the following except which one?

Greater independence in economic policy making.

Increased international trade and capital flows.

Greater synchronization of trade cycles.

Increased vulnerability to external economic shocks.

68. Some not-for-profit organizations (NPOs) are required to show they are effective.

Which one of the following most closely defines effective?

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

69. All the following statements relate to an increase in government spending which is not accompanied by an increase in taxation.

Which statement is NOT correct?

The government's budget deficit will increase

The aggregate demand curve will shift to the right

The initial change in government spending may lead to a larger impact upon the economy

An expansionary monetary policy is being pursued

70. Which of the following statements best describes a private firm?

An organization that does not seek profit

An organization that is owned by shareholders

An organization that is outside the state's influence

An organization that is not directly owned by the state

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71. Which of the following will be characteristics of the stakeholders most able to influence the management of an organization?

High power, low interest

High power, high interest

Low power, high interest

Low power, low interest

72. Country Y and country Z both impose tariffs on goods imported from each other.

Which of the following would likely to be a long-term effect of the imposition of such tariffs?

None. Tariffs affect exports and imports rather than real income

Real income would be lower in Z but higher in Y

Real income would be lower in Y but higher in Z

Real income would grow at a slower rate in both countries compared to a situation in which there are no tariffs

73. All of the following are supply side policies to promote economic growth except which one?

Reduction of marginal rates of income tax.

Tariffs to encourage domestic suppliers of goods.

Deregulation of the financial sector.

Tax relief for business expenditure on research and development.

74. Which of the following is not a consequence of a country suffering a high rate of inflation?

A depreciation in its exchange rate compared to currencies from countries with lower inflation rates

A high nominal rate of interest

Impoverishment of households on fixed incomes

Excess aggregate demand for goods and services

75. A firm is considering a large capital investment project.

It is considering delaying it in case the government introduces special tax breaks for investment that will reduce the tax the firm pays. In which stage of the trade cycle is the government least likely to reduce taxation?

Recession

Depression

Recovery

Boom

76. Which global institution is concerned with enforcing the GATT?

The IMF

The World Bank

The World Trade Organization

The G20

77. All of the following are characteristics of a recession except which one?

Rising levels of unemployment.

Increased inflationary pressure.

Improving trade balances.

Increased government budget deficits.

78. When the economy is in recession, which of the following is least likely to reduce unemployment?

An expansionary fiscal policy

The central bank cutting interest rates

Retraining schemes for redundant workers

A regulation extending employment rights for newly-hired workers

79. All of the following will result from increased international mobility of factors of production except which one?

A rise in world income and output.

Decreased international factor price differentials.

Increased financial flows on countries balance of payments capital accounts.

Decreased international specialization in production.

80. In a recession, the central bank might adopt a policy of low interest rates.

The businesses most likely to benefit from this are those which:

Sell their products mostly on credit

Have low gearing ratios

Are dependent on imported components and raw materials

Produce services rather than manufactured goods

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81. In a recession, the appropriate policy for a government seeking a recovery in the economy would be to:

cut public expenditure, reduce taxes, and lower interest rates

raise public expenditure, reduce taxes and lower interest rates

raise public expenditure, raise taxes and lower interest rates

cut public expenditure, raise taxes and raise interest rates

82. The existence of a natural rate of unemployment means that

the short run Phillips curve is steeper that the long run Phillips curve.

nominal wages rise faster the prices in the long run.

governments cannot reduce unemployment below this level.

there is no trade-off between inflation and unemployment in the long run.

83. In which of the stages of the trade cycle should the management accountant consider forecasting lower sales than in the previous year?

Recession

Depression

Recovery

Boom

84. Which of the following would result from a depreciation in the exchange rate for a country's currency?

i. A fall in the foreign exchange price of that country's exports.

ii. A rise in the foreign exchange price of that country's imports.

iii. A rise in production costs for businesses using imported inputs.

iv. A worsening in that country's terms of trade.

v. A fall in the domestic prices of that country's imports.

vi. A rise in the domestic price of that country's exports.

(i), (ii) and (iv) only

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

(ii), (v) and (vi) only

(iv), (v) and (vi) only

85. A rise in interest rates in an economy would lead to all of the following except which one?

A rise in the exchange rate for the currency

A rise in personal saving

An increase in business investment

A rise in public expenditure

86. Which of the following assertions would not be consistent with supply side economics?

Lower taxation increases national income by reducing disincentives to work and invest

High interest rates may reduce investment expenditure and so harm national income growth

Increasing aggregate demand will not affect national income or the price level

Aggregate supply creates its own demand

87. The distinguishing feature of a transnational (multinational) company is that

it exports its products to more than one country.

its production process uses inputs from more than one country.

it has production facilities in more than one country.

it has shareholders in more than one country.

88. Which ONE of the following increases the price of the shares in ABC plc?

A fall in interest rates

Falling demand for some of ABC's key products

Constant ROCE at ABC plc

News of better economic outlook in ABC's home country

89. All of the following are examples of structural unemployment except which one?

Redundancies in shipbuilding caused by competition from abroad.

Falling employment in manufacturing industry resulting from a decline in consumer incomes.

Unemployment in coal mining caused by the advent of new energy sources.

Above average unemployment rates among low skilled workers.

90. All of the following would lead to fall in the circular flow of national income except which one ?

A fall in business investment

A fall in personal savings rates

A reduction in the level of government expenditure

A rise in the marginal propensity to save

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91. A business would benefit most from an appreciation in the currency of the country in which it is based if:

it exports to other countries a significant proportion of its output

it imports a high proportion of the raw materials and components it uses

in its domestic market it faces competition from imports

its production costs are largely domestic labor costs

92. At which stage of the trade cycle should management anticipate a rise in interest rates?

Recession

Depression

Recovery

Boom

93. When faced with a recession, the appropriate combination of policies for a government in order to generate a recovery is

Tax cuts, reduced public expenditure and lower interest rates.

Monetary expansion, increases in public expenditure and an appreciation of the exchange rate.

Reduction of the fiscal deficit and increased money supply.

Tax cuts, monetary expansion and a depreciation of the exchange rate.

94. All of the following could cause the onset of a recession except which one?

A significant appreciation of the exchange rate

A decline in business investment

A significant fall in personal savings rates

An increase in the government budget deficit

95. Inflation is undesirable for all of the following reasons except which one?

Inflation decreases the international competitiveness of the business sector.

Inflation distorts the price system and the process of resource allocation.

Inflation shifts wealth from debtors to creditors in an arbitrary fashion.

Inflation makes business forecasting and planning more difficult.

96. The business sector will be affected by a contraction in the money supply because

Interest rates will tend to fall, thus reducing business costs.

Inflation will fall and thus demand in the economy will expand.

Consumer credit will contract thus reducing consumer demand.

The exchange rate will fall thus making business more internationally competitive.

97. As a result of a period of rapid economic growth, an economy is likely to experience all of the following except which one?

An improving overseas trade balance.

Falling levels of unemployment.

Increased inflationary pressure.

Rising government tax receipts.

98. If a government adopted an expansionary fiscal policy of cutting direct taxes, the businesses that would benefit most would be those whose products:

Are largely bought on credit

Are largely exported

Have a high price elasticity of demand

Are sold mainly to individual consumers

99. Which ONE of the following should NOT be classed as an agent of a firm's shareholder?

A non-executive director

An executive director

The chair of the company

The firm's banker

100. Which of the following best describes a project that has a negative Net Present Value?

A loss making project

A project that doesn't make enough profit to pay the interest on the money borrowed to invest in it

A project that doesn't make sufficient returns to fully compensate investors for the funds they invest in it

A project that will only start making profits after the present year has finished

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