| Exam Code | BA1 |
| Exam Name | Fundamentals of Business Economics |
| Questions | 468 Questions Answers With Explanation |
| Update Date | July 15,2024 |
| Price |
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Which of the following is most likely to lead to a rise in the exchange rate of country's currency and a fall in the price of stocks shares?
A. An increase in the deficit in the country's balance of payments on current account
B. Foreign investors purchasing shares on the country's capital markets
C. An increase in the country's money supply
D. An increase in rates of interest within the country
The real rate of interest is
A. The rate of interest charged by banks on loans.
B. The nominal rate of interest adjusted for inflation.
C. The compound rate of interest.
D. The rate of interest charged on loans plus administrative charges.
Which of the following is not a source of long-term capital for a company?
A. Retained profits
B. Dividends
C. Term loans
D. Issuing corporate bonds
According to the purchasing power parity theory, if a country's inflation rate is 5% higher than the inflation rates of the country's competitors in the world economy
A. The country's exchange rate will fall by 5% to restore the terms of trade
B. The domestic purchasing power of the currency must fall
C. The country's firms must reduce their export prices to remain competitive
D. The overseas demand for the country's exports will be price elastic
Which of the following provide possible explanations for the existence of a structure of interest rates?(i). Borrowers having different risk profiles(ii). Lenders wishing to lend for different time profiles(iii). The market for loanable funds being perfectly competitive(iv). The existence of margins between borrowing and lending rates
A. (i) and (iv) only
B. (ii) and (iii) only
C. (i), (ii) and (iv) only
D. (i), (ii) and (iii) only
All of the following are appropriate policies to deal with the problem of industries which cause pollution except which one?
A. Taxes on the consumption of the product
B. Subsidies to the producers
C. The auctioning of pollution permits
D. Legal controls to limit pollution levels
The linking of net savers with net borrows is known as:
A. financial intermediation
B. the savings function
C. money transfer
D. credit creation
What is meant by a 'Eurobond'?
A. A bond denominated in Euros
B. A bond issued to markets anywhere in Europe
C. A bond denominated in a currency that differs from the domestic currency of the country where the bond was issued
D. A bond issued by the European Central Bank
Which ONE of the following would be expected to reduce the net present value of a proposed investment project? A rise in
A. the expected cash flows from the project
B. the scrap value of the capital at the end of the project's life
C. interest rates
D. the net present value of alternative projects
All of the financial instruments are traded on the long term capital market except one.Which ONE is the exception?
A. Shares
B. Certificate deposit
C. Government undated stock
D. Long dated bonds
All of the following are examples of not-for-profit organizations except one. Which ONE is the exception?
A. Mutual savings societies
B. Charities
C. Partnerships
D. Trade Unions
Why was the Global Banking Crisis of 2007 followed by a credit crunch of low lending?
A. Governments sought to reduce aggregate demand to avoid a boom
B. Households and firms were unwilling to borrow
C. Banks had lost reserves and could not support high lending
D. Households had stop saving due to loss of confidence in commercial banks
Which one of the following would lead to a fall (depreciation) in the exchange rate for a country's currency?
A. A fall in interest rates in that country
B. An inflation rate below that of the country's trading partners
C. A fall in that country's imports
D. A fall in the export of capital from that country
A business could meet a short term financial need by all of the following except one. Which ONE is the exception?
A. Using its cash reserves
B. A bank overdraft
C. Issuing shares
D. Factoring
Identify the source of funds most appropriate for a growing company to use which wishes to borrow funds long-term to pay for initial marketing research and promotion?
A. A debenture
B. A commercial bill
C. Ordinary shares
D. Overdraft
Diseconomies of scale
A. are the result of the operation of the law of diminishing returns
B. occur because all firms face a U shaped short run average cost curve
C. cause the long run average cost curve to rise
D. are the result of businesses adopting a divisional structure
Which of the following is NOT a suitable way for a manufacturing company to finance buying assets?
A. Certificates of deposit
B. Commercial bills
C. Commercial bonds
D. Leases
£100 of new cash is issued, which is then deposited in a bank which is part of a banking system operating a cash ratio of 10%. The maximum possible increase in the moneysupply which can follow from this transaction, additional to the initial deposit, is
A. £90
B. £190
C. £900
D. £1000
Which of the functions of a financial intermediary is described by the following statement 'Bundles small deposits of liquidity into larger loans'?
A. Aggregation
B. Risk management
C. Maturity transformation
D. Introducing borrows and lenders
All of the following are functions of central banks except which one?
A. Banker to the commercial banks
B. Holder of the foreign exchange reserves
C. Banker to the government
D. Determination and conduct of fiscal policy
