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Wiley CPA Examination Review Outlines And Study Guides Volume 1 - 2012-2013 39th Edition Patrick R. Delaney, O. Ray Whittington - Solutions
The market structure Karen Parker is attempting to enter is best described asa. A natural monopoly.b. A cartel.c. An oligopoly.d. Monopolistic competition.
The large capital outlay necessary for the equipment is an example of a(n)a. Entry barrier.b. Minimum efficient scale.c. Created barrier.d. Production possibility boundary.
Which of the following is not a means by which a firm might hedge the political risk of an investment in another country?a. Insurance.b. Buy futures contracts for future delivery of the country’s currency.c. Finance the operations with local-country capital.d. Enter into joint ventures with
Simon Corp., a US company, has made a large sale to a French company on a 120-day account payable in euros. If management of Simon wants to hedge the transaction risk related to a decline in the value of the euro, which of the following strategies would be appropriate?a. Lend euros to another
Assume that the exchange rate of US dollars to euros is 1.80 to 1e ur o.H ow mu ch wo ul da US co mp an yg ai no rl os ei ft he co mp an yh as a10, 000 eu ro re ce iv ab le an dt he ex ch an ge ra te we nt to 1.75 to 1 euro?a. $10,000 loss.b. $10,000 gain.c. $500 loss.d. $500 gain.
Which of the following factors is least likely to affect a country’s currency foreign exchange rates?a. Interest rates in the country.b. Political stability in the country.c. Inflation in the country.d. The tax rate in the country.
When net exports are negative, there is a net flow ofa. Goods from firms in foreign countries to the domestic country.b. Money from foreign countries to the firms of the domestic country.c. Goods from the firms of the domestic country to foreign countries.d. Goods and services which result in a
Assume that the three-month forward rate for the euro is 1.367 an dt he sp ot ra te is 1.364. What is the forward premium or discount on the euro?a. 0.88% premium.b. 0.88% discount.c. 0.23% premium.d. 0.23% discount.
Which of the following describes a pegged exchanged rate?a. A currency rate that is tied to the US dollar.b. A currency rate with its value determined by market factors.c. A currency market in which the country’s central bank keeps the rate from deviating too far from a target band or value.d. A
What is an appropriate response by an importing country for the payment of export subsidies by an exporting country?a. Countervailing duties.b. Foreign exchange controls.c. Trade embargo.d. A dumping pricing policy.
Which of the following accurately describes a dumping pricing policy?a. Selling goods domestically at a price less than cost.b. Selling goods in another country at a price less than cost.c. Selling goods in another country at an excessive price.d. Selling goods domestically at an excessive price.
Which of the following is not a foreign exchange control that may be implemented by a country?a. Banning possession of foreign currency by citizens.b. Fixed exchange rates.c. Restricting currency exchange to government approved exchangers.d. Requiring a floating exchange rate.
Which of the following measures creates the most restrictive barrier to exporting to a country?a. Tariffs.b. Quotas.c. Embargoes.d. Exchange controls.
If the value of the US dollar in foreign currency markets changes from 1=6 ma rk st o1 = 4 marksa. The German mark has depreciated against the dollar.b. German imported products in the US will become more expensive.c. US tourists in Germany will find their dollars will buy more German products.d.
Exchange rates are determined bya. Each industrial country’s government.b. The International Monetary Fund.c. Supply and demand in the foreign currency market.d. Exporters and importers of manufactured goods.
If the US dollar declines in value relative to the currencies of many of its trading partners, the likely result is thata. Foreign currencies will depreciate against the dollar.b. The US balance of payments deficit will become worse.c. US exports will tend to increase.d. US imports will tend to
Assuming exchange rates are allowed to fluctuate freely, which one of the following factors would likely cause a nation’s currency to appreciate on the foreign exchange market?a. A relatively rapid rate of growth in income that stimulates imports.b. A high rate of inflation relative to other
In the law of comparative advantage, the country which should produce a specific product is determined bya. Opportunity costs.b. Profit margins.c. Economic order quantities.d. Tariffs.
Which one of the following groups would be the primary beneficiary of a tariff?a. Domestic producers of export goods.b. Domestic producers of goods protected by the tariff.c. Domestic consumers of goods protected by the tariff.d. Foreign producers of goods protected by the tariff.
If the central bank of a country raises interest rates sharply, the country’s currency will most likelya. Increase in relative value.b. Remain unchanged in value.c. Decrease in relative value.d. Decrease sharply in value at first and then return to its initial value.
All of the following are true about international trade except thata. The gains from international trade depend on specialization with comparative advantage.b. Absolute advantage without comparative advantage does not result in gains from international trade.c. Absolute advantage is defined as the
What factor explains the difference between real and nominal interest rates?a. Inflation risk.b. Credit risk.c. Default risk.d. Market risk.Global Economics
Economies often experience inflation but seldom experience long period of deflation. Which of the following is true about a deflationary economy?a. Companies are hesitant to make investments.b. The lower prices encourage consumers to make major purchases.c. Interest rates tend to be high.d. Actual
Which of the following is true about deflation?a. It motivates consumers to borrow money.b. It motivates businesses to make investments.c. It results in very low interest rates.d. It results in economic expansion.
The discount rate set by the Federal Reserve System is thea. Required percentage of reserves deposited at the central bank.b. Rate that commercial banks charge for loans to each other.c. Rate that commercial banks charge for loans to the general public.d. Rate that the central bank charges for
The formula for calculating a price index for the year 2013, using the year 2008 as a reference period isa. Price of 2013 market basket in 2013 Price of 2013 market basket in 2008 × 100b. Price of 2008 market basket in 2013 Price of 2008 market basket in 2008 × 100c. Price of 2013 market basket
The producer price index measuresa. The price of a basket of commodities at the point of the first commercial sale.b. Price changes for all products sold by domestic producers to foreigners.c. Price changes of goods purchased from other countries.d. The price of a fixed market basket of goods and
The rate of unemployment caused by changes in the composition of unemployment opportunities over time is referred to as thea. Frictional unemployment rate.b. Cyclical unemployment rate.c. Structural unemployment rate.d. Full-employment unemployment rate.
Assume that the United States Congress passes a tax law that provides for a “rebate” to taxpayers. One of the goals of the rebate isa. Increase consumer disposable income and expand the economy.b. Increase consumer disposable income and contract the economy.c. Decrease consumer disposable
Economists and economic policy makers are interested in the multiplier effect because the multiplier explains whya. A small change in investment can have a much larger impact on gross domestic product.b. Consumption is always a multiple of savings.c. The money supply increases when deposits in the
Which of the following is a tool of monetary policy that a nation’s central bank could use to stabilize the economy during an inflationary period?a. Selling government securities.b. Lowering bank reserve requirements.c. Lowering bank discount rates.d. Encouraging higher tax rates.
The federal budget deficit is thea. Total accumulation of the federal government’s surpluses and deficits.b. Excess state, local, and federal spending over their revenues.c. Amount by which the federal government’s expenditures exceed its revenues in a given year.d. Amount by which liabilities
If a government were to use only fiscal policy to stimulate the economy from a recession, it woulda. Raise consumer taxes and increase government spending.b. Lower business taxes and government spending.c. Increase the money supply and increase government spending.d. Lower consumer taxes and
Which of the following instruments of monetary policy is the most important means by which the money supply is controlled?a. Changing the reserve ratio.b. Open-market operations.c. Manipulation of government spending.d. Changing the discount rate.
The Federal Reserve System’s reserve ratio isa. The specified percentage of a commercial bank’s deposit liabilities that must be deposited in the central bank.b. The rate that the central bank charges for loans granted to commercial banks.c. The ratio of excess reserves to legal reserves that
If the Federal Reserve Board wanted to implement an expansionary monetary policy, which one of the following actions would the Federal Reserve Board take?a. Raise the reserve requirement and the discount rate.b. Purchase additional US government securities and lower the discount rate.c. Reduce the
According to fiscal policy principles, a tax increase willa. Increase spending and increase aggregate demand.b. Increase spending and reduce aggregate demand.c. Reduce spending and increase aggregate demand.d. Reduce spending and reduce aggregate demand.
The Federal Reserve Board most directly influences a corporation’s decision of whether or not to issue debt or equity financing when it revises thea. Corporate income tax rate.b. Prime rate at which the Federal Reserve Bank lends money to member banks.c. Discount rate at which the Federal Reserve
The money supply in a nation’s economy will decrease followinga. Open-market purchases by the nation’s central bank.b. A decrease in the discount rate.c. An increase in the reserve ratio.d. A decrease in the margin requirement.
The most effective fiscal policy program to help reduce demand-pull inflation would be toa. Decrease the rate of growth of the money supply.b. Increase both taxes and government spending.c. Decrease taxes and increase government spending.d. Increase taxes and decrease government spending.
A period of rising inflationa. Increases the price level, which benefits those who are entitled to receive specific amounts of money.b. Enhances the positive relationship between the price level and the purchasing power of money.c. Will not be affected by contracts that include the indexing of
Government borrowing to finance large deficits increases the demand for lendable funds anda. Increases the supply of lendable funds.b. Exerts downward pressure on interest rates.c. Has no impact on interest rates.d. Puts upward pressure on interest rates.
Some economic indicators lead the economy into a recovery or recession, and some lag it. An example of a lagging indicator isa. Chronic unemployment.b. Orders for consumer and producer goods.c. Housing starts.d. Consumer expectations.
The primary reason for allowing legal immigration into industrial nations is the immigrants’ potential fora. Reducing a trade deficit.b. Fulfilling a trade agreement.c. Contributing to economic growth.d. Fulfilling a political agreement.
Disposable income is calculated asa. Gross domestic product minus the capital cost allowance.b. Net domestic product minus indirect business taxes plus net income earned abroad.c. Personal income minus transfer payments.d. Personal income minus personal taxes.
Which of the following may provide a leading indicator of a future increase in gross domestic product?a. A reduction in the money supply.b. A decrease in the issuance of building permits.c. An increase in the timeliness of delivery by vendors.d. An increase in the average hours worked per week of
An upturn in economic activity is indicated by all of the following, excepta. Increased housing starts.b. Reduction in the quantity of unemployment claims.c. Increase in personal travel.d. Reduction in the amount of luxury purchases.
Which one of the following would not be included in the calculation of the gross domestic product (GDP)?a. Purchase of a new home.b. An automotive worker’s wages.c. A doctor’s fee.d. Purchase of common stock.
In national income terms, aggregate demand is thea. Demand for money by the community in a period of full employment.b. Total expenditure on capital goods by entrepreneurs during a period of full employment.c. Demand that is needed if a country’s economy is to operate at optimum level and the
For a given level of tax collections, prices, and interest rates, a decrease in governmental purchases will result in a(n)a. Increase in aggregate demand.b. Increase in aggregate supply.c. Decrease in aggregate demand.d. Decrease in aggregate supply.
During the recessionary phase of a business cyclea. The purchasing power of money is likely to decline rapidly.b. The natural rate of unemployment will increase dramatically.c. Potential national income will exceed actual national income.d. Actual national income will exceed potential national
If an increase in government purchases of goods and services of $20 billion causes equilibrium GDP to rise by$80 billion, and if total taxes and investment are constant, the marginal propensity to consume out of disposable income isa. 0.75b. 0.25c. 1.25d. 4.00
If consumer confidence falls, the impact upon the economy isa. A downturn.b. An upturn.c. No change.d. Consumer confidence does not have an impact upon the economy.
What is the main factor that differentiates the short-run cost function from the long-run cost function?a. Nothing, the two functions are identical.b. The level of technology.c. Changes in government subsidies.d. The nature of the costs.Aggregate Demand and Business Cycles
In microeconomics, the distinguishing characteristic of the long run on the supply side is thata. Only supply factors determine price and output.b. Only demand factors determine price and output.c. Firms are not allowed to enter or exit the industry.d. All inputs are variable.
Marginal revenue isa. Equal to price in monopolistic competition.b. The change in total revenue associated with increasing prices.c. Greater than price in pure competition.d. The change in total revenue associated with producing and selling one more unit.
The marginal revenue product when one worker is added to a team of 11 workers isa. $ 42.00b. $225.00c. $105.00d. $ 47.50
The marginal revenue per unit when one worker is added to a team of 11 workers isa. $105.00b. $225.00c. $ 35.00d. $ 47.50
The marginal physical product when one worker is added to a team of 10 workers isa. 1 unit.b. 8 units.c. 5 units.d. 25 units.
Daily costs for Kelso Manufacturing include $1,000 of fixed costs and total variable costs are show below.Unit output 10 11 12 13 14 15 Cost 125 250 400 525 700 825 The average total cost at an output level of 11 units isa. $113.64b. $125.00c. $215.91d. $250.00
The marginal cost of producing the ninth unit isa. $23.50b. $23.75c. $25.75d. $33.75
The measurement of the benefit lost by using resources for a given purpose isa. Economic efficiency.b. Opportunity cost.c. Comparative advantage.d. Absolute advantage.
In the long run, a firm may experience increasing returns due toa. Law of diminishing returns.b. Opportunity costs.c. Comparative advantage.d. Economies of scale.
Because of the existence of economies of scale, business firms may find thata. Each additional unit of labor is less efficient than the previous unit.b. As more labor is added to a factory, increases in output will diminish in the short run.c. Increasing the size of a factory will result in lower
In the pharmaceutical industry where a diabetic must have insulin no matter the cost and where there is no other substitute, the diabetic’s demand curve is best described asa. Perfectly elastic.b. Perfectly inelastic.c. Elastic.d. Inelastic.Costs of Production
The law of diminishing marginal utility states thata. Marginal utility will decline as a consumer acquires additional units of a specific product.b. Total utility will decline as a consumer acquires additional units of a specific product.c. Declining utilities causes the demand curve to slope
All of the following are complementary goods excepta. Margarine and butter.b. Cameras and rolls of film.c. VCRs and video cassettes.d. Razors and razor blades.
If a product’s demand is elastic and there is a decrease in price, the effect will bea. A decrease in total revenue.b. No change in total revenue.c. A decrease in total revenue and the demand curve shifts to the left.d. An increase in total revenue.
Which of the following is not likely to affect the supply of a particular good?a. Changes in government subsidies.b. Changes in technology.c. Changes in consumer income.d. Changes in production costs.
If a group of consumers decide to boycott a particular product, the expected result would bea. An increase in the product price to make up lost revenue.b. A decrease in the demand for the product.c. An increase in product supply because of increased availability.d. That demand for the product would
As the price for a particular product changes, the quantity of the product demanded changes according to the following schedule:Total quantity demanded Price per unit 100 50 150 45 200 40 225 35 230 30 232 25 Us in gt he ar cm et ho d, t he pr ic ee la st ic it yo fd em an df or th is pr od uc tw
As the price for a particular product changes, the quantity of the product demanded changes according to the following schedule:Total quantity demanded Price per unit 100 50 150 45 200 40 225 35 230 30 232 25 Us in gt he ar cm et ho d, t he pr ic ee la st ic it yo fd em an df or th is pr od uc tw
Wilson Corporation has a major competitor that produces a product that is a close substitute for Wilson’s good.If the coefficient of cross-elasticity of demand for Wilson’s product with respect to the competitor’s product is 2.00 and the competitor decreases its price by 5%, what is the
X and Y are substitute products. If the price of product Y increases, the immediate impact on product X isa. Price will increase.b. Quantity demanded will increase.c. Quantity supplied will increase.d. Price, quantity demanded, and supply will increase.
Price ceilingsa. Are illustrated by government price support programs in agriculture.b. Create prices greater than equilibrium prices.c. Create prices below equilibrium prices.d. Result in persistent surpluses.
Which one of the following would cause the demand curve for a commodity to shift to the left?a. A rise in the price of a substitute product.b. A rise in average household income.c. A rise in the price of a complementary commodity.d. A rise in the population.
Long Lake Golf Course has raised greens fees for a nine-hole game due to an increase in demand.Previous rate New rate Average games played at previous rate Average games played at new rate Regular weekday 10 11 80 70 Senior citizen 6 8 150 82 Weekend 15 20 221 223 Which one of the following is
If the income elasticity of demand coefficient for a particular product is 3.00, the good is likelya. A luxury good.b. A complementary good.c. An inferior good.d. A necessity.
A valid reason for the government to intervene in the wholesale electrical power market would include which one of the following?a. A price increase that is more than expected.b. Electricity is an essential resource and the wholesale market is not competitive.c. The electricity distribution
If the federal government regulates a product or service in a competitive market by setting a maximum price below the equilibrium price, what is the long-run effect?a. A surplus.b. A shortage.c. A decrease in demand.d. No effect on the market.
A polluting manufacturing firm tends, from the societal viewpoint, toa. Price its products too low.b. Produce too little output.c. Report too little profitability.d. Employ too little equity financing.
In a competitive market for labor in which demand is stable, if workers try to increase their wagea. Employment must fall.b. Government must set a maximum wage below the equilibrium wage.c. Firms in the industry must become smaller.d. Product supply must decrease.
In which of the following situations would there be inelastic demand?a. A 5% price increase results in 3% decrease in the quantity demanded.b. A 4% price increase results in a 6% decrease in the quantity demanded.c. A 4% price increase results in a 4% decrease in the quantity demanded.d. A 3% price
When the federal government imposes health and safety regulations on certain products, one of the most likely results isa. Greater consumption of the product.b. Lower prices for the product.c. Greater tax revenues for the federal government.d. Higher prices for the product.
Which of the following will cause a shift in the supply curve of a product?a. Changes in the price of the product.b. Changes in production taxes.c. Changes in consumer tastes.d. Changes in the number of buyers in the market.
Given the following data, what is the marginal propensity to consume?Level of Disposable income Consumption 40, 000 38,000 48,000 44,000a. 1.33b. 1.16c. 0.95d. 0.75
In any competitive market, an equal increase in both demand and supply can be expected to alwaysa. Increase both price and market-clearing quantity.b. Decrease both price and market-clearing quantity.c. Increase market-clearing quantity.d. Increase price.
An individual receives an income of 3, 000 pe rm on th, a nd sp en ds 2,500. An increase in income of 500 pe rm on th oc cu rs, a nd th ei nd iv id ua ls pe nd s2,800. The individual’s marginal propensity to save isa. 0.2b. 0.4c. 0.6d. 0.8
The local video store’s business increased by 12%after the movie theater raised its prices from 6.50 to 7.00.Thus, relative to movie theater admissions, videos area. Substitute goods.b. Superior goods.c. Complementary goods.d. Public goods.
Which of the following has the highest price elasticity coefficient?a. Milk.b. Macaroni and cheese.c. Bread.d. Ski boats.
Demand for a product tends to be price inelastic ifa. The product is considered a luxury item.b. Few good complements for the product are available.c. The population in the market area is large.d. People spend a large share of their income on the product.
A decrease in the price of a complementary good willa. Shift the demand curve of the joint commodity to the left.b. Increase the price paid for a substitute good.c. Shift the supply curve of the joint commodity to the left.d. Shift the demand curve of the joint commodity to the right.
Which of the following market features is likely to cause a surplus of a particular product?a. A monopoly.b. A price floor.c. A price ceiling.d. A perfect market.
An improvement in technology that in turn leads to improved worker productivity would most likely result ina. A shift to the right in the supply curve and a lowering of the price of the output.b. A shift to the left in the supply curve and a lowering of the price of the output.c. An increase in the
Which one of the following has an inverse relationship with the demand for money?a. Aggregate income.b. Price levels.c. Interest rates.d. Flow of funds.
What will be the result on the equilibrium price for the product?a. Increase.b. Decrease.c. Remain the same.d. Cannot be determined.
Which of the following could cause the change shown in the graph?a. A decrease in the price of the product.b. An increase in supply of the product.c. A change in consumer tastes.d. A decrease in the price of a substitute for the product.
As a business owner you have determined that the demand for your product is inelastic. Based upon this assessment you understand thata. Increasing the price of your product will increase total revenue.b. Decreasing the price of your product will increase total revenue.c. Increasing the price of
A supply curve illustrates the relationship betweena. Price and quantity supplied.b. Price and consumer tastes.c. Price and quantity demanded.d. Supply and demand.
If both the supply and the demand for a good increase, the market price willa. Rise only in the case of an inelastic supply function.b. Fall only in the case of an inelastic supply function.c. Not be predictable with only these facts.d. Rise only in the case of an inelastic demand function.
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