BEC CPA Exam Review Questions &
Answers 2023/2024
Demand Curve Shift Upward (direct relationship-positive shift) - ANSWER-The price of subsitute goods,
expectations of price changes, income for normal goods, and extent of market
Demand Curve Shift Downward (inverse relationship-neg. shift) - ANSWER-The price of complement
good, income for inferior goods, and consumer boycotts
Three common measures of price inflation: - ANSWER-1. The Consumer Price Index (CP)
2. The Producer Price Index (PPI)
3. The GDP Deflator
Okun's law - ANSWER-Provides a general rule of thumb showing how economic growth rates faster than
average often result in reductions in unemployment
Product differentiation strategies - ANSWER-seek to make the demand for a firm's products more
inelastic.
Transfer pricing - ANSWER-is the process for setting prices that are charged for the transfer of goods or
services between related parties such as departments of a large entity.
Full employment implies that - ANSWER-there frictional and structural unemployment, but not cyclical
unemployment.
The consumer price index (CPI) - ANSWER-is a common measure of inflation. It compares the price of
goods and services in a base year to the price of the same goods and services at a later year. The CPI is
commonly used to convert figures not readily comparable across years into figures that are more
comparable.
,The phases of the business cycle are - ANSWER-expansion, peak, contraction (ie, recession), and trough.
Peaks are - ANSWER-usually characterized by a lack of available labor and capital, which results in a
deceleration of growth. Output is at maximum and unemployment is as low as possible—or at the
"natural" rate.
Tight labor markets and lack of excess capacity often result in - ANSWER-the bidding up of wages and
prices, leading to an acceleration of inflation.
A change in account balances will always be measured as - ANSWER-(the current balance - the prior
balance), with a positive result indicating an increase and a negative result a decrease.
Transportation costs would exist - ANSWER-even in the absence of government.
There are three common measures of price inflation: - ANSWER-consumer price index, producer price
index and GDP deflator.
Deflation - ANSWER-a decrease in the general level of prices and inflation rate is below zero
Collusive pricing - ANSWER-results when competing suppliers agree that they will not compete on the
basis of price, setting a uniform price to be charged by all suppliers (conspire). This enables the suppliers
to establish higher than market prices.
Price floor - ANSWER-a minimum price for a good or service
price ceiling - ANSWER-a maximum price that can be legally charged for a good or service
, Structural unemployment - ANSWER-represents a mismatch between the skills of workers and the needs
of the labor market. This usually occurs due to technological advances that change or eliminate the need
for the specific skills many workers possess.
A significant decline in the U.S. dollar tends to - ANSWER-hurt U.S. importers and benefit U.S. exporters,
while making foreign goods more expensive for U.S. consumers.
Stagflation is defined as - ANSWER-simultaneous unemployment and inflation
Quantitative easing - ANSWER-involves the Fed buying securities to add liquidity to the economy, when
short-term interest rates are already close to zero.
Globalization - ANSWER-has been ongoing for many decades. It has many aspects, including more savers
having more internationally diversified portfolios (i.e., reduced home bias), more firms operating
internationally, and increased international trade occurring within companies.
Impose countervailing duties legally under WTO rules: - ANSWER-the other country must have disobeyed
a WTO panel that told it to correct a problem.
Theory of Derived Demand - ANSWER-the value of goods of higher order is derived from that of the
corresponding goods of lower order
GDP = - ANSWER-Consumption by households + Investment + Government spending + Net exports
Opportunity cost is defined as - ANSWER-the best alternative use or benefit foregone as the result of a
business decision.
Dumping is the practice of - ANSWER-selling product below its production costs, generally, in an effort to
reduce competition.
Selling foreign reserves causes - ANSWER-one's currency to appreciate, which is the opposite of what a
country with a trade surplus needs if it wants to maintain exchange rate stability.
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