CAA Business Finance & Economics

Question 1

What is the primary relationship between bond prices and interest rates?

Accepted Answer

They move in opposite directions

Answer

They move in the same direction

Answer

They are unrelated to each other

Answer

Bond prices affect interest rates but not vice versa

Question 2

In a perfectly competitive market, which of the following best describes the long-run equilibrium?

Accepted Answer

Firms earn zero economic profits

Answer

Firms earn positive economic profits

Answer

Firms earn negative economic profits

Answer

Firms earn maximum accounting profits

Question 3

Which of the following best describes 'opportunity cost'?

Accepted Answer

The value of the next best alternative foregone

Answer

The total monetary expenditure of a decision

Answer

The sunk cost of a previous investment

Answer

The accounting profit derived from a decision

Question 4

What happens to the demand for a good when the price of a complementary good increases?

Accepted Answer

Demand for the good decreases

Answer

Demand for the good increases

Answer

Demand for the good remains unchanged

Answer

Supply of the good increases

Question 5

The money multiplier in a fractional reserve banking system is equal to:

Accepted Answer

The reciprocal of the reserve requirement ratio

Answer

The total deposits in the banking system

Answer

The interest rate set by the central bank

Answer

The reserve requirement multiplied by deposits

Question 6

What does a country's Gross Domestic Product (GDP) measure?

Accepted Answer

Total market value of final goods and services produced within its borders in a period

Answer

Total income earned by citizens regardless of where they live

Answer

Total exports minus imports over a fiscal year

Answer

Total government expenditures on public services

Question 7

The law of diminishing marginal returns states that, as more units of a variable input are added to fixed inputs:

Accepted Answer

The additional output from each extra unit of input will eventually decrease

Answer

Total output will eventually decline to zero

Answer

Prices will fall proportionally as production increases

Answer

Total costs rise at a constant rate with output