SECTION ONE (Compulsory):Single-choice questions
, D9 E& a$ j: ~# m8 ^ From the following four options, select a correct and fill in its labeling the brackets. (A total of 10 points) 2 ^$ }- p" X I: ~1 I
1. Assume that there is inflation in the United States and the government pursues a contractionary fiscal policy. The likely effect would be that: () % f1 z) `! O* _6 b
A. There would be a lower domestic interest rate and an increase in the demand for dollars that would partially offset the policy. , g: t) I7 {( y" W$ Q
B. There would be depreciation in the value of the dollar and a decrease in net exports that would partially offset the contractionary fiscal policy.
* k1 ?5 U# [& a: ^ C. There would be an increase in net exports and an increase in aggregate demand that would partially offset the policy.
1 N+ R1 V' H: _; ]( ~ w( l# } D. There would be a decrease in net exports and a decrease in aggregate demand that would partially reinforce the policy. 4 B h4 G# I/ U: o
2. The expansionary fiscal policy has: ()
$ K+ _- q/ W3 n" T/ V6 R" V1 J A. Lessened the economic recession but increased the government debt. 3 W2 s7 T* O: ]7 Y
B. Lessened the economic recession and decreased the government debt.
7 j$ h8 V1 f+ l5 O# G+ Z; t9 X C. Worsened inflation but decreased the government debt.
4 K* O8 s u" F D. Lessened inflation but increased the government debt. ; ~# \! \8 j& G. _5 x
3. Open-market operations refer to: () M8 o6 F. d7 i+ W
A. Loans from commercial banks to corporations and consumers.
) K7 f. Q+ Q- q! Q0 n1 v; f- | Q B. Inter-bank loans. M- o) Q- E% \6 ^/ z8 f6 {
C. Changes in interest rates caused by the changes in commercial bank loans.
1 c# N6 e7 e D+ ^/ q D. Buying and selling governmental securities by the central bank.
( I/ a5 c \1 z, U 4. Suppose money supply and the general price level remain the same, and money demand is the function of income and interest rate, an increase in incomes will: () 9 T: ~9 `8 ~% y1 `. d
A. Increase both money demand and interest rate
8 G( I! v8 K+ I ?& h B. Increase the money demand and lower the interest rate. 1 l" x: x0 S5 B. _
C. Decrease the money demand and increase the interest rate
$ @& @$ o' }4 R2 K: ]0 u D. Decrease money demand and interest rate.
! n: ` Z: `# v& V 5. A country’s trade balance mainly depends on its: () # C* Q* D7 L) ^8 `
A. Domestic savings. 1 R M |: I) O& g; T
B. Domestic investment.
3 ~/ C, t M$ F2 u" |; g6 N; R r C. The country’s production capacity. . l6 a8 [/ N" g- _# g
D. The country’s interest rate. d9 r& W% @8 ~! Z
6. When the nominal interest rate rises, ()
: O2 w% l# F# \. D A. Economic activity is encouraged. - e- _9 I0 \& y* Y' C& F2 B
B. The real interest rate rises and the price of bonds rises. 6 _ T! C8 M, X, ~2 |* q" o
C. Inflation rises and the real interest rate falls. ! w! @5 {& K. g6 N( G
D. The real interest rate rises and the price of bonds falls. ) R3 J/ q# a7 \' ~* c
7. A firm has fixed costs of £100,000 per month and variable costs of £25 for item. It proposes to sell these items for £50 each. What is the break-even output for this firm? ()
9 s$ b3 j8 t& z. F/ E! m A. 4,000 units
; u/ \6 `% S( ^$ J1 S# I B. 4,000 units in a month. ! t# p1 u/ }0 D) ^
C. Cannot be worked out from the information.
) D, E3 p0 A/ X! e U7 G D. 2,000 units per month. 2 ]. d6 W# L2 I$ A
8. An investor purchases a stock at $60 and at the same time, sells a 3-month call on the stock. The short call has a strike price of $65 and a premium of $3.60. The risk-free rate is 4%. The breakeven underlying stock price at expiration is closest to: () 9 T4 [) r( L% x; q @% D; B1 ^/ H; o
A. $55.85.
6 u+ }. l2 p2 j0 N- W& W B. $56.40.
0 z! I; V% d; U0 `4 V C. $60.80.
/ s3 X, C; i% H$ r. R) I: l8 i' M D. $61.40.
- M' N6 B. o% y: l 9. The liquidity of a firm is a measure of: () 1 m- k( M! L! c
A. Its ability to pay bills as they come due. 4 p# F6 D& w- g$ y2 W+ E9 T! ^
B. Its ability to respond to changes in demand.
7 T8 ]0 K$ X+ [ C. How flexible it is in its production planning. 8 I" @$ Y3 H" ?
D. How quickly and easily a firm could relocate to another site.
$ w9 o2 H6 { ?6 Z! j) ^: [2 C) S9 n 10. Assume U.S. GAAP (generally accepted accounting principles) applies unless otherwise noted. % O$ \' p$ O/ Q0 W/ A9 I$ l
When an issue is going to be put to a vote, by shareholders, at an annual general meeting the company prepares a (n): () ; {! I4 B4 i" q, w# M+ U
A. Annual report.
$ { c3 v( |& y: [: E" ?& ^( y' ^ B. Interim report. 9 ?& f$ c n& }7 g& D
C. Proxy statement. ! K# G' S1 n+ o1 v& j
D. Management statement of responsibility. |