BA1 CIMA Fundamentals of Business Economics exact Exam Questions

Fundamentals of Business Economics

Last Update 4 hours ago Total Questions : 468

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Question # 21

A government receives some direct tax once a year and many firms pay over the indirect tax they owe quarterly. However, payments to government employees are made at the same rate every month.

Which asset does a government use to overcome this lack of synchronization between payments and receipts?

Long-dated government bonds

Short-dated government bonds

Treasury bills

Index-linked stock

Question # 22

Which of the following equations is correct regarding interest rates?

Real interest rate = Nominal interest rate + Expected inflation rate

Real interest rate = Nominal interest rate + Market risk premium

Nominal interest rate = Real interest rate + Expected inflation rate

Nominal interest rate = Real interest rate + Market risk premium

Question # 23

Which of the following can be used by a national government as justification for introducing a protectionist trade policy?

To promote the development of an infant industry

To allow specialisation

To promote economies of scale

To increase competition.

Question # 24

According to the principle of comparative advantage which of the following explains how country V may benefit from international trade?

Specialisation and international trade will only be successful if tariffs are used to protect country V ' s economy.

Jobs historically done by country V ' s nationals have been off-shored to countries with cheaper labour costs.

Country V can specialise in exporting oil which it can produce relatively cheaply, and import goods.

Country V will only benefit from international trade if another country loses.

Question # 25

If the production of a good involves an external social cost, resource allocation could be improved by:

providing a subsidy for the consumers of the good

imposing an indirect tax on the good

providing a subsidy for the producers of the good

the government imposing price controls to reduce the price of the good.

Question # 26

jerry has just been appointed the director of Foodgo Pic, an international supermarket chain. He outlines his main priorities to his staff, which are as follows:

1: To increase sales from £23bn per year to £30bn per year within the next five years.

2: To increase the number of items stocked in Foodgo stores to attract more customers.

3: To prioritise sales figures over profits, which have been stagnant for five years.

Which of the following best describes why shareholders may be unhappy with jerry ' s approach to the business?

A focus on sales rather than profits would mean shareholder dividends may decrease

An increase in the number of products in Foodgo stores will likely lead to increased footfall and hence increased sales and profits

The increase of sales from £23bn a year to £30bn a year is not ambitious enough and needs to be revised

An increase in sales will lead to a fall in the price of shares in Foodgo Pic, meaning shareholders will receive less in dividends

Question # 27

The Competition and Markets Authority is a regulatory body in the UK. In 2017, the CMA found the proposed merger of Heineken and Punch Pubs in breach of its competition laws. Heineken and Punch Pubs have agreed

to divest in pubs in areas where they are the two dominant pub companies.

Which of the following are ways in which consumers might directly benefit from this decision?

Select ALL that apply.

Heineken/Punch Pubs will not be able to charge excessive prices for alcoholic beverages served at their pubs

There will be a greater variety of pubs for consumers to choose from in certain areas

Heineken will divest in a certain number of pubs where the merger would have created monopolies

The companies ' divestment of pubs in certain areas could lead to the closure of the majority of pubs in said area

The CMA will use this decision as a precedent for others in the future

Question # 28

Brilliant Buys Local is a subsidiary of Brilliant Buys, and operates a number of smaller stores in local neighbourhoods.

The managing director of Brilliant Buys Local, Mr Davidson, has been given a scatter diagram with sales of each store based on the size of the local population.

Which of the following options outlines the best ways to interpret this diagram in this context?

Select ALL that apply.

Use Pearson ' s coefficient to accurately draw a line of best fit

Draw a line of best fit by eye and estimate how much of a correlation there is between store sales and population

Rearrange the data points on the scatter diagram so that it shows any correlation more clearly

Use the diagram to interpret that two of the stores with the highest sales are in areas with a medium-sized population

Use the diagram to interpret that the store with the lowest sales was in an area with a population of 5000

Question # 29

Which ONE of the following would make the market supply of a product price elastic?

Suppliers are unable to store unsold product

Firms can join the industry easily

Demand is price elastic