Macro & Micro

Question 1

List the four FOP and their return/payment for work

Answer 1

FOP: Return:
Capital Interest
Enterprise Profit
Land Rent
Labour Wages

Question 2

Which of the following roles can the government carry out in an economy?

a) Producer

b) Purchaser

c) Investor

d) Makes transfer payments

e) All of the above

Answer 2

e

Question 3

What are the two main causes of demand pull inflation?

Answer 3

Fiscal: Increased government spending or reduced taxation

Credit: availability can increase spending

Question 4

Match the key terms to their features

a) Monetary policy
b) Fiscal policy
c) Supply side policy

1. Government spending, taxation, borrowing
2. Regulation, subsidies etc
3. Interest rates to control spending. Time lag. Impact on SPICED. QE

Answer 4

a 3
b 1
c 2

Question 5

What are the seven Ps that determine Price (in control of the business)

Answer 5

Product
Price
Promotion
Place
People
Processes
Physical evidence

Question 6

C

a) Giffen Good
b) Veblen Good
c) Inferior Good
d) Normal Good

1. Luxury good - as income increases, demand increases
2. Demand falls as income rises
3. Basic good - as income increases, demand falls
4. Demand rises as income rises

Answer 6

a 3
b 1
c 2
d 4

Question 7

What is the calculation for PED

Answer 7

PED = % change in QD / % change in P

Queen over pauper

Question 8

What is the calculation for YED (income elasticity)

Answer 8

YED = % change in QD / % change in Y

Question 9

What is the calculation for XED (cross elasticity of demand)

Answer 9

XED = % change in QD of good A / % change in P of good B

Question 10

What is the calculation for PES

Answer 10

PES = % change in QS / % change in P

Question 11

Match the key term to their definition

a) Allocative efficiency
b) Productive efficiency

1. Goods and services that are wanted by buyers are produced in optimum quantities. Impossible to increase benefit by reallocation
2. Economy produces at lowest factor costs. Cost of production is at lowest point

Answer 11

a 1 2b

Question 12

What is the porter hypothesis?

Answer 12

Strict environmental regulations -> innovation in clean technology

Question 13

What are the 4 types of business responses to regulation?

Answer 13

Entrenchment - no response

Mere compliance - cost of compliance is passed onto consumer

Full compliance - change of behaviour and processes

Innovation - porter hypothesis

Question 14

What is the applicable fine if a company is charged with collusive behaviour in its UK operations?

a) 10% of annual worldwide revenues

b) 10% of annual UK revenues

c) 20% of annual worldwide revenues

d) 20% of annual UK revenues

Answer 14

a) 10% of annual worldwide revenues