Economic Concepts & Analysis Flashcards - CPA Business Environment and Concepts (BEC)

Question

All of the following are components of the formula used to calculate gross domestic product except:

Answer

GDP calculated through the expenditure approach includes all of the following except household income.

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Question

What does the consumer price index measure?

Answer

The CPI is a measure of the inflation rate (the percentage change of the consumer price index from one period to the next.)

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Question

Which of the following is correct regarding the CPI for measuring the estimated decrease in a company's buying power?

Answer

The CPI measures the costs of a market basket of specific goods commonly purchased by consumers.

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Question

The CPI rises from 131 in year 1 to 136.5 in year 2. What is the annual inflation rate?

Answer

(136.5-131)/131 * 100 = 4.2%

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Question

If the nominal interest rate is 10% and the rate of inflation is 5%, the real interest rate is:

Answer

The real interest rate is equal to the nominal interest rate minus inflation.

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Question

Under perfect or pure competition, suppliers and customers act independently and there are barriers to entry.

Answer

Under perfect or pure competition, plenty of suppliers and customers act independently and there are no barriers to entry.

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Question

Globalization is often measured using the following metric:

Answer

Globalization represents the increased dispersion and integration of the world's economies. It is often measured as the growth in world trade as a percentage of GDP.

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Question

Each of the following is an effect from opening markets to foreign investment except:

Answer

Under this circumstance, investment growth rates will likely increase rather than decrease as there are more opportunities for investment and growth.

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Question

Increased globalization is made possible by each of the listed factors except:

Answer

The IMF does not regulate currency values. Its activities are designed to stabilize exchange rates but it is not empowered to regulate currency values.

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Question

All of the following nations are considered emerging nations except:

Answer

The only other emerging nation not listed here is India.

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Question

The concept of a global economic balance of power anticipates:

Answer

The concept of balance of power anticipates that no one nation will dominate or interfere with the activities of others.

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Question

Which of the following is not a factor that drives globalization?

Answer

Stronger currencies have no impact on globalization, as currencies fluctuate all the time. These other factors would much more likely to facilitate international trade and global markets.

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Question

Which of the following methods may the Federal Reserve use to reduce inflationary pressures?

Answer

The Fed can increase margin requirements as a means to decrease the economy's money supply. This is a viable contractionary monetary policy used by the Fed to lower the economy's price level.

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Question

Which of the following individuals would be most hurt by an unanticipated increase in inflation?

Answer

A retiree living on fixed income would be hurt because the retiree's income would not increase to offset the negative effects of inflation.

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Question

If the Federal Reserve raises the discount rate, which of the following effects is likely to occur?

Answer

Declines in the money supply lead to an increase in interest rates.

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Question

Under which of the following conditions is the supplier most able to influence or control buyers?

Answer

When there are few good substitutes for a supplier's product, the supplier has market power.

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Question

Which one of the following is not one of Porter's five forces?

Answer

Existence of complementary products is not one of Porter's five forces.

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Question

When will new companies attempt to enter a market?

Answer

Under monopolistic competition, barriers to entry are low, and potentially high profits exist in the market. This would incentivize new firms to enter the market.

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Economic Concepts & Analysis - CPA Business Environment and Concepts (BEC)

All of the following are components of the formula used to calculate gross domestic product except:

GDP calculated through the expenditure approach includes all of the following except household income.

What does the consumer price index measure?

The CPI is a measure of the inflation rate (the percentage change of the consumer price index from one period to the next.)

Which of the following is correct regarding the CPI for measuring the estimated decrease in a company's buying power?

The CPI measures the costs of a market basket of specific goods commonly purchased by consumers.

The CPI rises from 131 in year 1 to 136.5 in year 2. What is the annual inflation rate?

(136.5-131)/131 * 100 = 4.2%

If the nominal interest rate is 10% and the rate of inflation is 5%, the real interest rate is:

The real interest rate is equal to the nominal interest rate minus inflation.

Under perfect or pure competition, ____ suppliers and customers act independently and there are ____ barriers to entry.

Under perfect or pure competition, plenty of suppliers and customers act independently and there are no barriers to entry.

Globalization is often measured using the following metric:

Globalization represents the increased dispersion and integration of the world's economies. It is often measured as the growth in world trade as a percentage of GDP.

Each of the following is an effect from opening markets to foreign investment except:

Under this circumstance, investment growth rates will likely increase rather than decrease as there are more opportunities for investment and growth.

Increased globalization is made possible by each of the listed factors except:

The IMF does not regulate currency values. Its activities are designed to stabilize exchange rates but it is not empowered to regulate currency values.

All of the following nations are considered emerging nations except:

The only other emerging nation not listed here is India.

The concept of a global economic balance of power anticipates:

The concept of balance of power anticipates that no one nation will dominate or interfere with the activities of others.

Which of the following is not a factor that drives globalization?

Stronger currencies have no impact on globalization, as currencies fluctuate all the time. These other factors would much more likely to facilitate international trade and global markets.

Which of the following methods may the Federal Reserve use to reduce inflationary pressures?

The Fed can increase margin requirements as a means to decrease the economy's money supply. This is a viable contractionary monetary policy used by the Fed to lower the economy's price level.

Which of the following individuals would be most hurt by an unanticipated increase in inflation?

A retiree living on fixed income would be hurt because the retiree's income would not increase to offset the negative effects of inflation.

If the Federal Reserve raises the discount rate, which of the following effects is likely to occur?

Declines in the money supply lead to an increase in interest rates.

Under which of the following conditions is the supplier most able to influence or control buyers?

When there are few good substitutes for a supplier's product, the supplier has market power.

Which one of the following is not one of Porter's five forces?

Existence of complementary products is not one of Porter's five forces.

When will new companies attempt to enter a market?

Under monopolistic competition, barriers to entry are low, and potentially high profits exist in the market. This would incentivize new firms to enter the market.

Under perfect or pure competition, suppliers and customers act independently and there are barriers to entry.