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Free CPA-Business Exam Braindumps (page: 38)

Page 37 of 132
PDF with 530 Questions

If the U.S. dollar increases in value relative to the other major currencies, aggregate demand should:

  1. Increase as U.S. goods become more attractive overseas.
  2. Decrease as U.S. goods become less attractive overseas.
  3. Depends on supply of foreign goods.
  4. Not necessarily change.

Answer(s): B

Explanation:

Choice "b" is correct. If the dollar gains in value, net exports will suffer as U.S. goods become more expensive overseas; hence aggregate demand will decrease. The supply of foreign goods domestically should increase as imports become cheaper.
Choice "a" is incorrect. Demand should decrease, not increase. Choice "c" is incorrect. Irrelevant to the question.
Choice "d" is incorrect. Demand should decrease, not remain the same.



A large increase in nominal wages, perhaps orchestrated by unions, would most likely result in:

  1. An increase in real GDP and a decrease in the price level.
  2. A decrease in real GDP and an increase in the price level.
  3. A decrease in real GDP and a decrease in the price level.
  4. An increase in real GDP and an increase in the price level.

Answer(s): B

Explanation:

Choice "b" is correct. An increase in nominal wages represents an increase in input costs. This would shift the aggregate supply curve to the left resulting in a decrease in real GDP and an increase in the overall price level. Choice "a" is incorrect. Real GDP would decrease, not increase.
Choice "c" is incorrect. The price level would increase, not decrease. Choice "d" is incorrect. Real GDP would decrease, not increase.



Economic fluctuations (or business cycles) are best described as:

  1. Long run increases in a nation’s standard of living.
  2. Changes in the profits of a given firm from one year to the next.
  3. Fluctuations of equal duration and equal severity in the level of economic activity over time.
  4. Fluctuations in the level of economic activity, relative to a long-term growth trend.

Answer(s): D

Explanation:

Choice "d" is correct. By the definition of business cycles. Choice "a" is incorrect. This is economic growth.
Choice "b" is incorrect. Business cycles refer to overall economic activity not the activity of one firm.
Choice "c" is incorrect. Business cycles are not predictable and are not of equal duration nor of equal severity.



Which of the following would most likely cause real GDP to increase the most:

  1. A rise in interest rates and a rise in input costs.
  2. A fall in interest rates and a fall in input costs.
  3. A rise in wealth and a rise in interest rates.
  4. A rise in consumer confidence and a fall in government spending.

Answer(s): B

Explanation:

Choice "b" is correct. A decline in interest rates would cause the aggregate demand curve to shift right, which increases real GDP. Similarly, a decline in input costs would cause the aggregate supply curve to shift right, which also increases real GDP.
Choice "a" is incorrect. Both of these events would cause real GDP to decline.
Choice "c" is incorrect. A rise in interest rates would cause real GDP to decline, not increase.
Choice "d" is incorrect. A decline in government spending would cause real GDP to decline, not increase.






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