IEO practice 1

In a city, there are two car factories, Factory A and Factory B. Factory A can produce 100 red cars or 200 yellow cars per batch, while Factory B can produce 50 red cars or 150 yellow cars per batch. Which factory has the higher opportunity cost of producing one yellow car?

• Both factories have the same opportunity cost

• Factory A

• There is not enough information to answer

• Factory B

Which of the following accurately describes the concept of the “natural rate of unemployment” and its significance for monetary policy?

• The rate of unemployment that can be achieved without causing inflation to rise

• The lowest possible rate of unemployment an economy can achieve

• The rate of unemployment that results from cyclical factors

• The rate of unemployment targeted by central banks to maintain economic growth

What is the primary purpose of a central bank's open market operations?

• To regulate the stock market

• To control the money supply and interest rates

• To provide loans to businesses

• To manage the national debt

Which of the following is an example of an automatic stabilizer in the economy?

• Tax cuts during a recession

• Unemployment benefits increasing as more people lose their jobs

• A government bailout for banks

• Interest rate cuts by the central bank

Which of the following statements about investment decision making is

correct?

• Opportunity costs are not relevant

• The return on capital employed considers the time value of money

• Capital budgeting is based on predictions of an uncertain future

• A strength of the payback method is that it is based on profitability

In evaluating the impact of relative inflation rates on the demand for a foreign currency, which of the following is true?

• Inflation is irrelevant to currency demand

• As inflation associated with a foreign economy increases in relation to a domestic economy, demand for the foreign currency falls

• As inflation associated with a foreign economy increases in relation to a domestic economy, demand for the foreign currency increases

• As inflation associated with a foreign economy decreases in relation to a domestic economy, demand for the foreign currency falls

Which of the following factors is likely to impact the strategic objectives of a public sector body or organization more than that of a private sector organization?

• The power of shareholders

• Government trade policy

• Overall government policy objectives

• Government competition policy

Which of the following is not a principle of corporate governance?

• Rights of shareholders

• Board responsibilities

• Auditor’s accountability and remuneration

• Risk management and internal control

A person has been promising investors in their company a very high annual return on their investment. To fund these promised returns, the person has been taking money from new investors and using it to pay the high returns demanded by earlier investors. What type of fraudulent activity is the person committing?

• Manipulating revenue reporting

• Advance fee fraud

• False invoicing

• A pyramid-style scheme

Assume that initially the exchange rate is 1 USD = 1 EUR. A company in Europe sells a product to a customer in the United States for $1,000. By the time the customer pays, the value of the European currency has strengthened by 20% compared to the US dollar. What will the final amount the company receives in its local European currency be?

• €416.67

• €1,200

• €833.33

• €400