CPA Module 42
Showing posts with label CPA Module 42. Show all posts
Showing posts with label CPA Module 42. Show all posts

The producer price index measures

The producer price index measures




a. The price of a basket of commodities at the point of the first commercial sale.
b. Price changes for all products sold by domestic produces to foreigners.
c. Price changes of goods purchased from other countries.
d. The price of a fixed market baskets of goods and services purchased by a typical urban consumer.


Answer: a.

If the Federal Reserve Board wanted to implement an expansionary monetary policy, which one of the following actions would the Federal Reserve Board take?

If the Federal Reserve Board wanted to implement an expansionary monetary policy, which one of the following actions would the Federal Reserve Board take?




a. Raise the reserve requirement and the discount rate.
b. Purchase additional US government securities and lower the discount rate.
c. Reduce the reserve requirement and raise the discount rate.
d. Raise the discount rate and sell US government securities.


Answer: b.

In macroeconomic terms, aggregate demand is the

In macroeconomic terms, aggregate demand is the




a. Demand for money by the community in a period of full employment.
b. Total expenditure on capital goods by entrepreneurs during a period of full employment.
c. Demand that is needed if a country's economy is to operate at optimum level and the level of investment is to be raised.
d. Total expenditures on consumer goods and investment, including government and foreign expenditures, during a given period.


Answer: d.

What percentage of the variation in quantity demanded is explained by price?

Yeager Corporation has used regression analysis to perform price elasticity analysis. In doing so management regressed the quantity demanded (y variable) against price (x variable) with the following results:
Multiple R: .86798
Adjusted R squared: .72458
Standard error: 542.33

Intercept: 56400.50
Price coefficient: -4598.20

What percentage of the variation in quantity demanded is explained by price?



a. 86.798%
b. 72.458%
c. 56.4%
d. 54.233%


Answer: b.

The market for product RK-25 is perfectly competitive. The current market price is $30, and the quantity demanded is 4 million. Due to changes in consumer tastes, a permanent increase in demand for RK-25 is expected in the near term. If nothing else changes in this market, which of the following would be the MOST feasible levels of short-term and long-term prices?

The market for product RK-25 is perfectly competitive. The current market price is $30, and the quantity demanded is 4 million. Due to changes in consumer tastes, a permanent increase in demand for RK-25 is expected in the near term. If nothing else changes in this market, which of the following would be the MOST feasible levels of short-term and long-term prices?



Short -term / Long-term
a. $39 / $35
b. $35 / $39
c. $35 / $30
d. $30 / $35


Answer: c. 

Which of the following is NOT a means by which a firm might hedge the political risk of an investment in another country?

Which of the following is NOT a means by which a firm might hedge the political risk of an investment in another country?




a. Insurance.
b. Buy futures contracts for future delivery of the country's currency.
c. Finance the operations with local-country capital.
d. Enter into joint ventures with local-country firms.


Answer: b. Political risk is the risk related to actions by a foreign government, such as enacting legislation that prevents the repatriation of a foreign subsidiary's profit or seizing a firm's asset. Answer b is correct because purchasing or selling futures contracts is designed to hedge transaction risks relating to foreign exchange rates.

Simon Corp., a US company, has made a large sale to a French company on a 120-day account payable in euros. If management of Simon wants to Hedge the transaction risk related to a decline in the value of the euro, which of the following strategies would be appropriate?

Simon Corp., a US company, has made a large sale to a French company on a 120-day account payable in euros. If management of Simon wants to Hedge the transaction risk related to a decline in the value of the euro, which of the following strategies would be appropriate?



a. Lend euros to another company for payment in 120 days.
b. Enter into a forward exchange contract to purchase euros for delivery in 120 days.
c. Enter into a futures contract to sell euros for delivery in the future.
d. Purchase euros on the spot market.


Answer: c. Selling euros in the future market, the firm has locked in the exchange rate today.

Assume that the exchange rate of US dollars to euros is $1.80 to 1 euro. How much would a US company gain or lose if the company has a 10,000 euro receivable and the exchange rate went to $1.75 to 1 euro?

Assume that the exchange rate of US dollars to euros is $1.80 to 1 euro. How much would a US company gain or lose if the company has a 10,000 euro receivable and the exchange rate went to $1.75 to 1 euro?




a. $10,000 loss.
b. $10,000 gain.
c. $500 loss.
d. $500 gain.


Answer: c

Which of the following describes a pegged exchange rate?

Which of the following describes a pegged exchange rate?




a. A currency rate that is tied to the US dollar.
b. A currency rate with its value determined by market factors.
c. A currency market in which the country's central bank keeps the rate from deviating too far from a target band or value.
d. A currency rate that is tied to the prime rate.


Answer: c.
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