SECTION ONE (Compulsory):Single-choice questions
; e O6 H/ z2 s+ ]* ], T* ?+ _ From the following four options, select a correct and fill in its labeling the brackets. (A total of 10 points) ! \; O. I: M9 B/ B
1. Assume that there is inflation in the United States and the government pursues a contractionary fiscal policy. The likely effect would be that: () - U9 ~, G$ _7 r& d: r4 @6 }
A. There would be a lower domestic interest rate and an increase in the demand for dollars that would partially offset the policy. & v# W5 p- Y' m. {, }" |# Y
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.
9 b1 I( v+ ~ p, ]9 [* A2 ` C. There would be an increase in net exports and an increase in aggregate demand that would partially offset the policy.
6 A5 D* f4 q S2 r5 g/ g, q7 o D. There would be a decrease in net exports and a decrease in aggregate demand that would partially reinforce the policy.
% H0 C2 t; J7 N7 n E m3 e 2. The expansionary fiscal policy has: ()
7 }3 v; j3 s2 F, r; n* M2 O, M A. Lessened the economic recession but increased the government debt.
; t8 ~# h9 a6 s0 _- }. K- s B. Lessened the economic recession and decreased the government debt.
/ N5 @, _& n* R C. Worsened inflation but decreased the government debt.
: O8 a4 E+ o3 b2 g9 c D. Lessened inflation but increased the government debt.
u% k& L/ Q" x 3. Open-market operations refer to: () * S* t$ t" a4 ]' K) W( p" _
A. Loans from commercial banks to corporations and consumers. 4 B- X: B7 K9 e* R3 r* P/ Q5 K: L
B. Inter-bank loans. 9 W& Z3 n( @5 F: @+ z! `7 B8 q9 z
C. Changes in interest rates caused by the changes in commercial bank loans.
2 W7 a7 M, r- M/ l5 e9 _& b) R9 V D. Buying and selling governmental securities by the central bank. " F" Z( R! }& P0 t
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: () ( y1 c2 Y+ J! \" O$ ]
A. Increase both money demand and interest rate
: q& D5 ]8 b( y: ]& }( [2 n B. Increase the money demand and lower the interest rate.
D. a- r: v1 A; |2 |' Z) ]! `; y C. Decrease the money demand and increase the interest rate 6 J: ^' k3 x9 z# W+ H$ @
D. Decrease money demand and interest rate. 1 o5 Q$ \* c6 O( ?3 I9 \
5. A country’s trade balance mainly depends on its: ()
' K7 y% Z) F" M. K: ` A. Domestic savings.
7 i S# Z0 Q( G7 r B. Domestic investment. 3 a) y4 V& u C% }5 I" q) L3 f
C. The country’s production capacity.
1 e+ R! j) a% i# b3 e D. The country’s interest rate. + J2 J7 o7 `3 r# f" v
6. When the nominal interest rate rises, () ( T# C; c Z6 |
A. Economic activity is encouraged.
4 }( f. y, g0 Z% _8 t3 g( R& d& _' G B. The real interest rate rises and the price of bonds rises.
7 L1 h" h# {/ ^7 c& E. ^ C. Inflation rises and the real interest rate falls. ) B; M/ y, g- V% F; i. e
D. The real interest rate rises and the price of bonds falls.
; C* O1 d" W7 x$ B 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? () 8 ?* ^" g0 L, `' L5 [% l9 Y+ C
A. 4,000 units 8 `8 t( ]; l$ z- A. Y' x
B. 4,000 units in a month.
8 K5 x4 Q1 B( ?4 U9 E C. Cannot be worked out from the information.
2 R6 |- V m# a- H D. 2,000 units per month. * e/ x7 K3 Z) \- A/ n
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 $3.60. The risk-free rate is 4%. The breakeven underlying stock price at expiration is closest to: () , z$ e* v0 r. l: I
A. $55.85. 4 x$ k4 S6 o" t6 M1 l" J
B. $56.40. * n9 J- V* S7 R% [; ~0 I
C. $60.80.
' v# q* g9 V" A1 q f D. $61.40. % x( o. l9 @. N/ i8 h- ^7 Z
9. The liquidity of a firm is a measure of: () ' ~- B- i# B6 d# b
A. Its ability to pay bills as they come due. - i4 z- ~/ X" |
B. Its ability to respond to changes in demand. : y3 P8 m5 Z2 n% m$ B
C. How flexible it is in its production planning. # r1 G1 p+ ]: u# d( `
D. How quickly and easily a firm could relocate to another site.
7 s/ b. G0 d# e2 h 10. Assume U.S. GAAP (generally accepted accounting principles) applies unless otherwise noted.
1 v+ x/ T9 r) g" x, k5 w When an issue is going to be put to a vote, by shareholders, at an annual general meeting the company prepares a (n): () 5 W1 X) e$ X5 r
A. Annual report. + W* [, b% `) t
B. Interim report. / } ^; Y0 h7 u* N1 m0 ?; q) }
C. Proxy statement. ! K2 A/ w% f* h2 R' m0 `4 V
D. Management statement of responsibility. |