Business Finance & Economics Flashcards
7 cards from real CAA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Business Finance & Economics flashcards as text
What is the primary relationship between bond prices and interest rates?
Answer: They move in opposite directions
When interest rates rise, existing bond prices fall because new bonds offer higher yields, making existing bonds less attractive to investors.
In a perfectly competitive market, which of the following best describes the long-run equilibrium?
Answer: Firms earn zero economic profits
In long-run competitive equilibrium, free entry and exit drive economic profits to zero as firms enter when profits are positive and exit when losses occur.
Which of the following best describes 'opportunity cost'?
Answer: The value of the next best alternative foregone
Opportunity cost is the value of the best alternative you give up when making a choice, capturing the true economic cost of any decision.
What happens to the demand for a good when the price of a complementary good increases?
Answer: Demand for the good decreases
Complementary goods are consumed together, so when the price of one rises and its demand falls, the demand for the complementary good also decreases.
The money multiplier in a fractional reserve banking system is equal to:
Answer: The reciprocal of the reserve requirement ratio
The money multiplier equals 1 divided by the reserve requirement ratio, indicating how much the total money supply expands per dollar of monetary base injected.
What does a country's Gross Domestic Product (GDP) measure?
Answer: Total market value of final goods and services produced within its borders in a period
GDP measures the total market value of all final goods and services produced within a country's geographic borders during a specific time period.
The law of diminishing marginal returns states that, as more units of a variable input are added to fixed inputs:
Answer: The additional output from each extra unit of input will eventually decrease
As more of a variable input is combined with fixed inputs, the marginal product of that input eventually decreases even though total output may still rise.