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Free CPA-Business Exam Braindumps (page: 44)

Page 43 of 132
PDF with 530 Questions

Which of the following is most likely to cause an increase in the amount of frictional unemployment in an economy?

  1. An invention that renders an industry obsolete.
  2. A downturn in aggregate business activity.
  3. An increase in the average age of the work force.
  4. A reduction in the average age of the work force.

Answer(s): D

Explanation:

Choice "d" is correct. Younger workers tend to move between jobs more frequently. Choice "a" is incorrect. This would lead to structural unemployment.
Choice "b" is incorrect. This would lead to cyclical unemployment.
Choice "c" is incorrect. Older workers tend to be voluntarily between jobs less frequently than younger workers.



Which of the following would lead to a reduction in inflation?

  1. Increasing aggregate demand and increasing aggregate supply.
  2. Decreasing aggregate demand and increasing aggregate supply.
  3. Decreasing aggregate demand and decreasing aggregate supply.
  4. Increasing aggregate demand and decreasing aggregate supply.

Answer(s): B

Explanation:

Choice "b" is correct. Decreasing aggregate demand and increasing aggregate supply will reduce the inflationary pressures.
Choice "a" is incorrect. Increasing aggregate demand causes the price level to rise. Choice "c" is incorrect. Decreasing aggregate supply causes the price level to rise. Choice "d" is incorrect. Both of these would cause the price level to rise.



Initially the nominal interest rate is 8 percent and the inflation rate is 6 percent. One year later, the nominal interest rate rises to 12 percent while the inflation rate rises to 10 percent. It follows that the real rate of interest:

  1. Has remained the same.
  2. Has fallen.
  3. Has risen.
  4. Insufficient information given for an answer.

Answer(s): A

Explanation:

Choice "a" is correct. The real interest rate equals the nominal interest rate minus the inflation rate. Thus, the real interest rate in the first year is: real interest rate = 8 − 6 = 2 and the real interest rate in the next year is: real interest rate = 12 − 10 = 2.



If consumption is $70b, investment $50b, government spending $20b, exports $7b, and imports $5b, what is GDP?

  1. $152b.
  2. $138b.
  3. $140b.
  4. $142b.

Answer(s): D

Explanation:

Choice "d" is correct. By the expenditure approach to measuring GDP, GDP equals: Consumption + Investment
+ Government Spending + Exports - Imports. Thus, GDP = 70 + 50 + 20 + 7 - 5 = 142b.






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