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Fundamentals of Business Economics

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Total Questions : 468

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Question # 51

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

Options:

A.  

(i) and (iv) only

B.  

(ii) and (iii) only

C.  

(i), (ii) and (iv) only

D.  

(i), (ii) and (iii) only

Discussion 0
Question # 52

Which of the functions of a financial intermediary is described by the following statement 'Invests across a wide range of assets to reduce the loss of capital value if a particular borrower defaults'?

Options:

A.  

Aggregation

B.  

Risk management

C.  

Maturity transformation

D.  

Introducing borrows and lenders

Discussion 0
Question # 53

Following the emergence of the global banking crisis in 2007 many central banks undertook quantitative easing through purchasing bonds back from banks with new money. Which function of a central bank does this describe?

Options:

A.  

Banker to the banking system

B.  

Supervision of the banking system

C.  

Banker to the government

D.  

Lender of last resort to the banking system

Discussion 0
Question # 54

Which of the following are not classed as a non-bank financial intermediary?

Options:

A.  

Life insurance companies

B.  

Building societies

C.  

Finance houses

D.  

Investment exchanges

Discussion 0
Question # 55

Which of the functions of a financial intermediary is described by the following statement 'converts a flow of short-term deposits into a supply of long term loans'?

Options:

A.  

Aggregation

B.  

Risk management

C.  

Maturity transformation

D.  

Introducing borrows and lenders

Discussion 0
Question # 56

All other things remaining equal, which of the following would encourage a speculative short-term capital flow into a country's currency?

Options:

A.  

A fall in the country's interest rates

B.  

An expected depreciation of the country's exchange rate

C.  

The abolition by the country of previously-imposed exchange controls which deterred inward investment

D.  

Foreign-based multinational companies locating new factories in the country

Discussion 0
Question # 57

The existence of a natural rate of unemployment means that

Options:

A.  

the short run Phillips curve is steeper that the long run Phillips curve.

B.  

nominal wages rise faster the prices in the long run.

C.  

governments cannot reduce unemployment below this level.

D.  

there is no trade-off between inflation and unemployment in the long run.

Discussion 0
Question # 58

The imposition of a tariff on imported goods by a country's government will result in all of the following except one. Which ONE is the exception?

Options:

A.  

A shift in domestic income from consumers to producers of the goods

B.  

A rise in the domestic price of the imported good

C.  

Greater cost push inflationary pressure in the economy

D.  

A shift to the left in the demand curve for the imported good

Discussion 0
Question # 59

If a country joined an economic union (for example, the European Union) its business sector could benefit from all of the following except which one?

Options:

A.  

Higher profit margins due to a reduction in transport costs.

B.  

Economies of scale as it gained access to a larger market.

C.  

Lower input costs as imports from other member states would become cheaper.

D.  

Reduced costs as a result of access to a wider supply of factors of production.

Discussion 0
Question # 60

Which of the following assertions would not be consistent with supply side economics?

Options:

A.  

Lower taxation increases national income by reducing disincentives to work and invest

B.  

High interest rates may reduce investment expenditure and so harm national income growth

C.  

Increasing aggregate demand will not affect national income or the price level

D.  

Aggregate supply creates its own demand

Discussion 0
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