Question 1
When governments change taxes, their transfer payments, and expenditure on goods and service, they influence aggregate demand through __________.
A. the world economy
B. consumer expectations
C. monetary policy
D. fiscal policy
Question 2
What represents the relationship between the quantity of real GDP demanded and the price level when all other influences on expenditure plans remain the same?
A. aggregate demand
B. aggregate supply
C. the money wage rate
D. the money price index
Question 3
Expenditures such as investment, government expenditure on goods and services, and exports __________ on real GDP.
A. do not depend
B. depend greatly (Incorrect)
C. remain constant based
D. vary in their individual dependence
Question 4
The __________ is the amount by which a change in autonomous expenditures is multiplied in order to determine the change in equilibrium expenditure that it generates.
A. marginal tax rate
B. marginal multiplier
C. expenditure reducer
D. expenditure multiplier
Question 5
As long as aggregate planned expenditure exceeds real GDP, companies will __________ production in order to restore their inventories to their target level.
A. maintain
B. decrease
C. increase
D. not adjust
Question 6
What is the total amount of final goods and service that firms in a country plan to produce, depending on the labor, capital, technology, natural resources, and entrepreneurial talent in the market?
A. the supply-demand model
B. the quantity of real gross domestic product (GDP. supplied
C. the quantity of potential GDP
D. the quantity of real GDP demanded
Question 7
Which of the following would cause an increase in aggregate demand in the short run?
A. an increase in the supply of money
B. a decrease in the price level
C. an increase in taxes
D. a crop failure
Question 8
If the price level from the GDP price index falls, what happens to the quantity of real GDP supplied?
A. it remains constant
B. it increases
C. it decreases
D. it barely changes
Question 9
Adjustments in __________ take the economy from the short-run equilibrium to the long-run equilibrium.
A. imports and exports
B. interest rates
C. wages and prices
D. the multiplier
Question 10
When the price level increases, the real interest rate __________.
A. is not affected
B. falls
C. rises
D. will rise or fall depending on demand
Question 11
When the real GDP increases, disposable income and consumption expenditure __________.
A. do not change
B. become inverted
C. decrease
D. increase
Question 12
All other things remaining the same, the lower the price level, the __________ the quantity of real GDP demanded.
A. smaller
B. greater
C. more constant
D. less constant
Question 13
When the Federal Reserve changes the quantity of money and the interest rate, it influences aggregate demand by using __________.
A. the world economy
B. consumer expectations
C. monetary policy
D. fiscal policy
Question 14
When the real wage rate changes, firms change the __________ and the level of production.
A. wage rate of employees
B. quality of goods or services produced
C. quantity of labor employed
D. production plans
Question 15
The change in equilibrium expenditure also equals the change in __________.
A. the potential GDP
B. the real GDP
C. income taxes
D. interest rates
Question 16
A rise in the price level __________ the buying power of money.
A. does not affect
B. increases
C. decreases
D. inverts
Question 17
If home prices are falling, consumers purchasing a home will find their purchasing power of money has increased. This benefit to consumers is called the __________.
A. inflation effect
B. wealth effect
C. home equity effect
D. multiplier effect
Question 18
To determine the equilibrium price level and equilibrium level of real GDP, the aggregate demand and aggregate supply must __________.
A. be considered separately
B. intersect
C. be disregarded
D. be considered as a multiplier
Question 19
What are the two main influences that the world economy has on aggregate demand?
A. foreign exchange rate and foreign income
B. foreign investments and foreign profit
C. revenues from overseas and foreign exchange rate
D. foreign expenditures and international trade
Question 20
The __________ curve summarizes the relationship between aggregate planned expenditure and the real GDP.
A. AES
B. AE
C. AD
D. APE
Question 21
Ready Tees, an on line retailer of t-shirts, orders 100,000 t-shirts per year from its manufacturer. The cost of ordering and delivery is $100 per order. If Ready Tees orders 6,667 t-shirts in each order, what are the firm's total annual ordering costs (rounded to the nearest dollar.?
A. $1,000
B. $667
C. $1,500
D. $2,000
Question 22
________ is the collective term used to describe a firm's decisions as to how customers will qualify for credit, what payment plan is allowed to creditors, and how overdue bills will be collected.
A. Credit policy
B. Collection policy
C. Credit history
D. Payment policy
Question 23
Extending credit to a customer has three major components:
A. a policy on how customers will qualify for credit, a policy on the payment plan allowed creditors, and a policy for collecting overdue bills.
B. a policy on how customers will qualify for credit, a policy on accounting for depreciation, and a policy on paying commissions on sales.
C. a policy on how customers will qualify for credit, a policy on the payment plan allowed creditors, and a policy on accounting for depreciation.
D. a policy on how customers will qualify for credit, a policy on paying commissions on sales, and a policy for collecting overdue bills.
Question 24
With energy costs greater than ever, Berwick's Bike Shop is well-placed for an expansion. Its initial capital cost (not including working capital. is $750,000, expected after-tax operating cash flow is $225,000 per year for five years, and the recovery of capital assets after five years is $75,000. There is also a $100,000 increase in working capital at the beginning of the project that is recovered in whole at the end of the life of the project in Year 5. If this project has a required rate of return of 15%, what is its IRR? Use a financial calculator to determine your answer.
A. 12.60%
B. 13.60%
C. 15.60% (Incorrect)
D. 14.60%
Question 25
Float, from the buyer's perspective, is called ________ float and from the seller's perspective, is called ________ float.
A. financing; crediting
B. collection; disbursement
C. crediting; financing
D. disbursement; collection
Question 26
When a company deals only in cash, the cash conversion cycle becomes ________.
A. the payable cycle
B. the collection cycle - the payable cycle
C. the production cycle
D. the collection cycle
Question 27
Ready Tees, an on line retailer of t-shirts, orders 100,000 t-shirts per year from its manufacturer. Ready plans on ordering t-shirts 12 times over the next year. Ready receives the same number of t-shirts each time it orders. The carrying cost is $0.10 per shirt per year. What is the annual carrying cost of the t-shirt inventory (rounded to the nearest dollar.?
A. $5,000
B. $834
C. $10,000
D. $417
Question 28
Total carrying cost equals ________.
A. The average carry cost per item times the maximum level of inventory
B. The average carry cost per item times the average level of inventory divided by 2
C. The average carry cost per item times the average level of inventory
D. The average carry cost per item times the minimum level of inventory
Question 29
Ready Tees, an on line retailer of t-shirts, orders 100,000 t-shirts per year from its manufacturer. Ready plans on ordering t-shirts 12 times over the next year. Ready receives the same number of t-shirts each time it orders. The carrying cost is $0.10 per shirt per year. The order cost is $500 per order. What is the annual ordering cost of the t-shirt inventory (rounded to the nearest dollar.?
A. $5,000
B. $10,000
C. $12,000
D. $6,000
Question 30
The optimal order quantity as determined by the EOQ occurs when ________.
A. ordering costs are exactly 1/2 of carrying costs
B. ordering costs are exactly twice as much as carrying costs
C. ordering costs equal carrying costs
D. None of the answers provided are accurate
Question 31
The ________ is the period from the start of cash outflow for producing a product or service until the associated cash inflow materializes from the sale of that product or service.
A. cash conversion cycle
B. current ratio
C. business operating cycle
D. accounts receivable cycle
Question 32
Which of the following is NOT an inventory management technique?
A. JIT
B. ABC
C. EOQ
D. 6 SIGMA
Question 33
The ________ begins at the time a firm first starts to make a product and lasts until the time the customer buys the product.
A. accounts receivable cycle
B. cash conversion cycle
C. production cycle
D. business operating cycle
Question 34
The Hannibal Homers minor league baseball club is considering an expansion of its stadium to increase capacity by 2,000 seats. Management estimates increased revenue from ticket and concession sales to be $600,000 per year for the next 5 years. The cost of expansion is $750,000, with an additional $50,000 in working capital. The working capital increase is permanent (will not be recovered after 5 years.. Annual costs are expected to increase by $200,000 per year, the club's cost of capital is 14%, and its tax rate is 30%. If the stadium addition is depreciated in a straight line to a value of $0.00 over 5 years, what is the NPV of this project (rounded to the nearest dollar.? (Ignore any revenues or costs associated with a terminal value of the project after five years..
A. $365,751
B. $165,751
C. $315,751
D. $1,115,751
Question 35
With energy costs greater than ever, Berwick's Bike Shop is well-placed for an expansion. Its initial capital cost (not including working capital. is $750,000, expected after-tax operating cash flow is $225,000 per year for five years, and the recovery of capital assets after five years is $75,000. If this project has a required rate of return of 15% and the initial cost of working capital is $100,000, should Berwick expand the bike shop? (Assume that the $100,000 of working capital is recovered in Year 5 at the end of the project life. Compute an NPV to support your decision..
A. No, because the NPV = -$8,759
B. Yes, because the NPV = $858,759
C. Yes, because the NPV = $8,759 (Incorrect. May be A is correct)
D. No, because the NPV = -$850,000
Question 36
An important objective of cash management is to ________ the disbursement float and ________ the collection float.
A. lengthen; lengthen
B. reduce; lengthen
C. reduce; reduce
D. lengthen; reduce
Question 37
Of the following items, which would be considered working capital as opposed to a capital asset?
A. An addition to the existing building designed to facilitate a new product line
B. A CAD/CAM machine used in the manufacturing process
C. Disposable parts that aid in installation and are shipped with each sale
D. None of the above are working capital assets.
Question 38
________ is the order quantity that minimizes total cost, and it is the result of trading off carrying costs and ordering costs.
A. EOQ
B. Q/2
C. ABC
D. None of the above
Question 39
Estimating ________ is one part of managing short-term cash needs. The second part is estimating ________.
A. accounts receivable, cash inflow
B. accounts receivable, cash outflow
C. cash inflow, cash outflow
D. cash inflow, accounts payable
Question 40
The ________ starts at the time production begins and ends with the collection of cash from the sale of the product.
A. business operating cycle
B. accounts receivable cycle
C. cash conversion cycle
D. production cycle
