Economics and Globalisation
Undergraduate Framework Examination
Module Name: Economics and Globalisation
Module Code: BMA4002 Level: 4
Day and Date: 22nd April 22 to 24th April 9am
Start time: 9.00 a.m. Duration: 48 hours
Instructions to candidates:
.
• Write your answers in an answer sheet and submit just the answer sheet to
Turnitin
Multiple choice Questions (2 marks each; 100 marks in total)
Question A B c D E F
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Your answers:
Clearly place a cross (X) in the box corresponding to your answer. If your
selection is unclear the question will not be marked. There is only one
answer per question.
Cross one box per question only
Choose the one alternative that best completes the statement or answers the
question:
1) If you own a building and you decide to make use of that building by
opening a restaurant
A) there are no irretrievable costs involved in this decision.
B) there is no opportunity cost of using this building for a restaurant because
you own it.
C) there is an opportunity cost of using this building for a restaurant because it
could have been used in other ways.
D) the only cost relevant to this decision is the price you paid for the building
2). Which of the following is NOT part of the opportunity cost of attending
university?
A) The tuition fees that you or your government pays.
B) The alternative uses of the time you spend studying.
C) The income that you could have earned if you did not attend university.
D) The cost of the food that you consume while you are attending university.
3). When an increase in the price of good A causes an increase in demand for
good B, the goods are
A) normal. B) complements. C) inferior. D) substitutes.
4) Which of the following might shift the demand curve for butter to the right?
A) A decrease in the price of margarine, a substitute
B) A decrease in the price of butter
C) An increase in income
D) An increase in the price of bread, a complement
5) Expectations about price changes will affect
A) both the demand and supply curves. B) the supply curve only.
C) the demand curve only. D) neither curve.
6) A movement upward along the demand curve to the left could be caused by
A) a rise in inflation. B) a fall in the price of substitutes.
C) a rise in income. D) a decrease in supply.
7) Which of the following will cause a shift in a supply curve?
A) A change in hourly wage costs.
B) A change in the profitability of alternative products.
C) An increase in the ability/productivity of the firms workforce.
D) All of the above
8) Which one of the following correctly describes how price adjustments
eliminate a surplus?
A) As the price rises, the quantity demanded will increase while the quantity
supplied will decrease.
B) As the price rises, the quantity demanded will decrease while the quantity
supplied will increase.
C) As the price falls, the quantity demanded will increase while the quantity
supplied will decrease.
D) As the price falls, the quantity demanded will decrease while the quantity
supplied will increase.
9) The following table shows the demand and supply schedules for good X.
Price (£) 1 2 3 4 5 6 7
Quantity demanded 120 100 80 60 40 20 0
Quantity supplied 0 20 40 60 80 100 120
Assume that supply increases by 40 units at all prices. What will be the effect
on equilibrium price?
A) Fall by £1 B) Rise by £1 C) Rise by £2 D) Fall by £2
10) Suppose that it is observed that the price of wheat falls and that the quantity
sold also falls. From this we can deduce
A) that the supply curve has shifted to the right, but we cannot deduce whether
or not the demand curve has shifted.
B) that the supply curve has shifted to the left, but we cannot deduce whether or
not the demand curve has shifted.
C) that the demand curve has shifted to the right, but we cannot deduce whether
or not the supply curve has shifted.
D) that the demand curve has shifted to the left, but we cannot deduce whether
or not the supply curve has shifted.
11) The price of apples falls by 5% and quantity demanded increases by 6%.
This means that the demand for apples is
A) perfectly inelastic. B) elastic.
C) perfectly elastic. D) inelastic
12) If the demand for oranges is unitarily elastic, the price elasticity of demand
for oranges is:
A) -100. B) -1. C) 1. D) 0.
13) The ABC Computer Company wants to increase the quantity of computers
it sells by 5%. If the price elasticity of demand is -2.5 the company must
A) increase price by 0.5%. B) decrease price by 0.5%.
C) increase price by 2.0%. D) decrease price by 2.0%.
14) The bus fare charged by the local bus company is £5 during the morning
rush hour, but only £3.50 after the rush hour. This can be explained by the fact
that the demand for bus rides during the morning rush hour is ________; but
after the rush hour the demand for bus rides is ________.
A) less elastic, more elastic B) more elastic, less elastic
C) unitarily elastic, inelastic D) perfectly elastic, perfectly inelastic
15) Price and total revenue are inversely related when demand is
A) inelastic. B) perfectly inelastic.
C) unitarily elastic. D) elastic
16) Suppose an increase of 10% in the price of steak reduces the consumption
of steak by 30%. Such a price rise will induce households to spend
A) more on products that are complementary with steak.
B) less of their income on steak.
C) more of their income on steak.
D) the same amount on steak as before
17) The ABC Computer Company spends a lot of money on advertising
designed to convince you that its personal computers are superior to all other
personal computers. If the ABC Company is successful
A) the demand for ABC personal computers will become less price elastic but
the demand for other firms’ personal computers will become more price elastic.
B) the demand for ABC personal computers and the demand for other firms’
personal computers will become more price elastic.
C) the demand for ABC personal computers will become more price elastic but
the demand for other firms’ personal computers will become less price elastic.
D) the demand for ABC personal computers and the demand for other firms’
personal computers will become less price elastic.
18) Assume that the income elasticity of demand for bread is 0.2. A 5% increase
in income will cause
A) a 1% increase in the demand for bread. B) a 25% decrease in the demand
for bread.
C) a 25% increase in the demand for bread. D) a 10% increase in the demand
for bread.
19) If the cross-price elasticity of demand between fish and chicken is 2, then a
2% increase in the price of fish will result in
A) a 4% increase in the quantity of chicken demanded.
B) a 1% increase in the quantity of chicken demanded.
C) a 10% increase in the quantity of chicken demanded.
D) 20% decrease in the quantity of chicken demanded.
20) Which of the following defines the price elasticity of supply?
A) The responsiveness of quantity supplied to a change in price
B) The responsiveness of supply to a change in demand
C) The responsiveness of quantity demanded to a change in supply
D) The responsiveness of quantity supplied to a change in income
21) Kathy eats five slices of pizza on a Saturday night but admits each slice of
pizza doesn’t taste as good as the previous one. This suggests that for Kathy
A) the marginal utility of a slice of pizza is negative.
B) the marginal utility of a slice of pizza is positive but decreasing.
C) the total utility of slices of pizza is increasing by larger and larger
increments.
D) the total utility of slices of pizza is declining
22) Insurance companies can lower their risks by
A) using the law of large numbers to make the number of claims more
predictable.
B) diversifying across insurance products.
C) granting large numbers of independent risk policies.
D) all of the above
23) Which of the following is not an example of either moral hazard or adverse
selection?
A) An individual not pointing out their worst characteristics on a job application
form.
B) A student not being as careful with their spending levels when the students
parents are paying his/her credit card bill.
C) A business owner/manager doing fewer hours work than his employees.
D) A shop worker doing less work of the days when the boss is not in the shop
24) Which of the following explains why too much choice can be a bad thing?
A) Consumers are irrational and so will make inefficient choices.
B) Firms have to produce too many products and this reduces the quality of
them.
C) Consumers are encouraged to buy too much which can lead to growing
levels of debt.
D) Too much choice can hinder decision making and reduce utility
25) Which of the following is a correct statement about the relationship between
average cost (AC) and marginal cost (MC)?
A) If AC = MC, then total cost is at a maximum.
B) If TC is declining then AC is negative.
C) If AC exceeds MC, then AC is falling.
D) If AC is at a minimum, then MC is also
26) Assume that the wool industry is a perfectly competitive industry. Why is it
difficult for a wool producer to make excess profits?
A) The assumption of free entry into the wool industry
B) The fact that the demand curve facing each wool producer is perfectly elastic
C) The fact that wool producers are ‘price takers’
D) The assumption that wool producers in the industry do not ‘differentiate’
their products
27) The following table shows costs and revenue schedules for a firm.
Quantity AC (£) MC (£) AR (£) MR (£)
100 3.20 3.00 3.00 3.00
200 2.80 2.80 3.00 3.00
300 2.84 3.00 3.00 3.00
400 3.00 3.60 3.00 3.00
500 4.00 6.00 3.00 3.00
600 6.00 9.00 3.00 3.00
How much total profit will the firm make at the profit-maximising level of
output?
A) £40 B) £0 C) £48 D) £16
28) If a country has negative outward FDI, this means that
A) sales of existing investments abroad exceed new investments abroad.
B) outward investment as a percentage of inward investment is falling.
C) sales of foreign assets in the country exceed sales of the country’s assets
abroad.
D) inward FDI exceeds outward FDI.
29) A vertically integrated multinational is one that
A) produces different products in different countries.
B) produces the same product in more then one country.
C) one which exports more than 50% of output.
D) produces various stages of production in different countries
30) Multinational corporations (MNCs) engaging in technological transfer may
lead to gains elsewhere in the economy as
A) other companies in the host county may try to copy the methods.
B) the MNC takes market share from local companies.
C) workers trained by the MNC move to other parts of the economy.
D) A and C
31) Encouraging FDI may be a risky long-term development strategy for a
country as MNCs are often
A) selling unusual products.
B) footloose.
C) concerned more with exporting than producing for the domestic market.
D) selling products with low profit margins.
32) The product life cycle model helps explain why
A) may engage in FDI at the launch stage.
B) firms always locate where labour is cheapest per hour.
C) firms may first export and then engage in FDI.
D) all of the above
33) If the total expenditure of the UK public sector is £650bn and revenues to
the UK public sector are £325bn in a given year, then
A) the UK will have a PSNB of -£325bn.
B) the UK government will have a budget deficit of £325bn.
C) the UK will have a PSNB of £325bn.
D) the UK general government debt will rise by £325bn
34) If the government wants to reduce unemployment by influencing the level
of activity in the economy, government spending could be ________ and/or
taxes could be ________.
A) decreased, increased B) increased, decreased
C) increased, increased D) decreased, decreased
35) Fiscal stance refers to
A) a government that is running a budget deficit.
B) whether a government is pursuing an expansionary or contractionary fiscal
policy.
C) a government that takes a tough stance when it comes to running the
country’s finances.
D) a government that prefers the use of fiscal to monetary policy for demand
management.
36) If the economy were booming, we would expect
A) government expenditure to be low and tax revenues to be low so that the
government could pay off the central government debt.
B) government expenditure to be low and tax revenues to be high so that the
public sector might be running a surplus.
C) government expenditure to be high and tax revenues to be low causing a
large budget deficit.
D) none of the above
37) A central bank wishing to operate a tighter monetary policy might
A) raise interest rates and use open-market operations so as to reduce the money
supply.
B) reduce interest rates but use open-market operations so as to reduce the
money supply.
C) lower interest rates to encourage spending and discourage saving.
D) promote investment in other countries by domestic firms.
38) Which of the following is NOT an undesirable side-effect of discretionary
fiscal policy?
A) Tax changes may change expectations.
B) Tax changes could have disincentive effects.
C) Cuts in spending may harm the poor.
D) Raising taxes raises prices
39) Which of the following is an example of an easy/relaxed monetary policy?
A) An increase in the liquidity ratio
B) A decrease in the repo rate
C) The central bank selling government securities in the open market
D) A decrease in the tax rate
40) The economy’s unemployment rate is 3% and the inflation rate is 15%. The
most likely policy for the central bank to pursue would be to
A) increase interest rates to try to reduce the inflation rate.
B) do nothing because the unemployment rate is so low.
C) reduce interest rates to try to reduce the unemployment rate.
D) increase interest rates so long as unemployment remained below a level
considered politically acceptable.
41) What is meant by ‘quantitative easing’?
A) An easing of restrictions on government borrowing
B) A reduction in Bank Rate
C) An increase in the quantity of government bonds being sold by the central
bank
D) An increase in money supply brought about by the purchase of assets by the
central bank
42) An important instrument of supply-side policy has been
A) the imposition of wage and price controls. B) the monetary system.
C) interest rate policy. D) the tax system
43) An increase in the level of benefit paid to an unemployed person would
A) make leisure less attractive than work.
B) have no affect on the cost of job search.
C) make it more expensive for the individual to spend time in job search.
D) reduce the opportunity cost of job search for the individual
44) If two countries, A and B, can produce the following amounts of two goods
X and Y for a given amount of resources:
Good X Good Y
Country A 10 7
Country B 12 10
Assuming there are no transport costs in trade:
A) Country A has a comparative advantage in the production of good Y and will
export good Y.
B) Country A has a comparative advantage in the production of good X and will
import good Y.
C) Country B has a comparative advantage in the production of good Y and will
import good Y.
D) Country A has a comparative advantage in the production of good X and will
export good Y.
45) If two countries engage in trade with one another, what determines which
country will gain the most from trade?
A) The terms of trade B) Absolute advantage
C) The exchange rate D) Comparative advantage
46) A tariff imposed on imported shoes will cause the domestic price of shoes
to ________ and the domestic production of shoes to ________.
A) increase, decrease B) decrease, decrease
C) decrease, increase D) increase, increase
47) Assume that before it joined the EU, the UK consumers had to pay a tariff
on imported Fiat cars. The UK’s main small car at the time was the mini. Italy
had a comparative advantage in the production of small cars. On joining the
EU, the UK car market would have seen
A) trade creation. B) trade diversion. C) trade reduction. D) trade
division
48) Which were seen to be possible economic advantages of Brexit by those
who argued for Brexit?
A) Freer trade with EU member states
B) A more flexible immigration policy
C) The ability to strike more advantageous trade deals with non-EU countries
than before.
D) A and C
49) Which one of the following items would NOT appear in the financial
account of the balance of payments?
A) Income from property abroad.
B) The purchase of UK assets by non-UK residents.
C) Portfolio investment.
D) Foreign direct investment in the UK.
E) The sale of foreign currencies from the reserves
50) If an exchange rate falls, and is expected continue falling, there will be
________ speculation.
A) destabilising B) stabilising C) no D) neutral
————
Globalization and Economics
Examination of the Undergraduate Framework
Economics and Globalisation is the name of the module.
BMA4002 Module Level: 4
Date and time: April 22nd to April 24th, 9 a.m.
Time of start: 9.00 a.m.
48-hour duration
Candidate instructions:
.
• Record your responses on an answer sheet and submit only the answer sheet to
Turnitin
Questions with Multiple Choice Answers (2 marks each; 100 marks in total)
Question A B c D E F
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