Institute of Certified Management Accountants of Sri Lanka. Technician Stage September 2011 Examination

Transcription

1 Copyright Reserved Serial No Technician Stage September 2011 Examination Examination Date : 18 th September 2011 Number of Pages : 05 Examination Time: 1.30 p:m p:m. Number of Questions: 09 Instructions to the Candidates 1. Time allowed is three (3) hours. 2. Answer all questions in Part I and two (2) questions from Section A and two (2) questions from Section B in part II 3. Answers should be entirely in the English language. Subject Subject Code Economics & International Business (ECN / 505) PART I Answer all parts of Question No.1. Select the most correct answer to each question. Write the number of the selected answer in your answer booklet with the English letter. E.g. (1) (a), (2) (b) etc Question No.1 (20 Marks) (1) An economy differs from another economy not because of the basic economic problems, but because the (a) opportunity cost differs. (b) choice differs. (c) solutions differ. (d) wants differ. (2) Economic Systems are classified as (a) Barter and Monetary. (b) Free Market and Planned. (c) Agricultural and Industrial. (d) Under Populated and Over Populated. (3) Cetris Paribus means (a) Demand and Supply diagram. (b) Production Possibility Curve. (c) Equilibrium Price. (d) Other things remain constant. (4) In a planned economy resource allocation is done according to the (a) planning committee. (b) choice. (c) invisible hand. (d) system of rationing. 1

2 (5) A free good is differentiated from an economic good, due to (a) an opinion of a person. (b) the fact that it is not produced and has no price. (c) the majority of the population gets it free. (d) its invisibility. (6) A derived demand is the demand for (a) complimentary goods and substitutes. (b) factors of production. (c) inferior goods. (d) veblen goods. (7) A hyperbola demand curve is one where (a) elasticity is zero. (b) elasticity is one. (c) elasticity is infinity. (d) elasticity is perfect. (8) Maximum price denotes the line drawn (a) above the equilibrium price. (b) below the equilibrium price. (c) on the equilibrium price. (d) vertical to equilibrium price. (9) A public limited company will differ from a nationalized industry because (a) of unlimited shares. (b) it exports more than imports. (c) it has branches in other countries. (d) it has limited liability. (10) If there is a regressive tax system, the burden will be (a) distributed equally. (b) distributed more among the higher income groups. (c) distributed more among the lower income groups. (d) distributed according to the market forces. (11) Economic growth has many advantages as well as many costs. A major economic cost would be (a) make the government earn more revenue. (b) make the government provide incentives to investors. (c) encourage competition in the market. (d) use up all the available resources. (12) Foreign direct investments are needed to a country that is lacking in (a) natural resources. (b) skilled labour force. (c) Capital due to lack of savings. (d) modern technology. 2

3 (13) Select the group which represents most suitable reasons why companies engage in international business. (a) Earn foreign exchange acquire resources, expansion of sales and to acquire modern technology. (b) Get tax reliefs, promote international relationships, face global competition and face risks. (c) Earn foreign exchange, acquire modern technology, visit different countries and get tax reliefs. (d) Acquire resources, build good foreign relationships, export excess production and maximize profits by importing low quality goods. (14) There is a single market with a common currency and a common central bank. It is not favourable to (a) promote economic growth. (b) promote free trade. (c) promote trade agreements between states. (d) promote harmony among states. (15) Globalization has brought about International Specialization to increase world output. What is the most important feature that is responsible for this? (a) A customs unions. (b) Free trade areas. (c) Multi national companies. (d) Cartels. (16) There is a link between developed economies and developing economies. It is in the form of (a) raw materials and markets. (b) availability of cheap labour. (c) availability of modern technology. (d) population migration. (17) The concept of the GNP is used to compare the living standards of different countries with limitations, due to (a) inaccurate and insufficient data. (b) not considering depreciation and inflation. (c) not considering indirect taxes and subsidies. (d) unequal distribution of resources. (18) Monopolistic Competition is different to Monopoly because of (a) selling an identical product. (b) selling a differentiated and branded product. (c) excess capacity. (d) advertising costs. (19) Oil is not a renewable resource and is getting depleted. How can this be shown in Production Possibility Curve (PPC)? (a) The curve will start at a lower point on the oil axis. (b) The curve will shift to the right. (c) The curve will shift to the left. (d) The curve will start at a higher point on the renewable resource axis. 3

4 (20) Letter of Credit (L / C) means (a) a documentary undertaking given by the importer s bank to the exporter s bank stating that bills drawn on the banker by the exporter in compliance with terms of the credit will be duly honourded. (b) a written undertaking given by the buyer to the seller to pay for the goods he had obtained on credit. (c) a document issued by a bank to an importer. (d) a bill of exchange issued by a bank to another bank on request. (20 1 Mark = 20 Marks) End of Part I PART II Section A Answer any 2 questions Question No. 2 (20 Marks) (a) Explain briefly the main features of a Market Economy. (b) What are the undesirable features of a market economy that led to countries to switch over to a Mixed System? Question No. 3 (20 Marks) (a) Explain what is meant by an equilibrium price. (b) How can there be disequilibrium in price, show two instances with diagrams. Question No. 4 (20 Marks) (a) Describe the main characteristics of a Monopoly Market Structure. (b) Describe the barriers that help to create such a market. Question No. 5 (20 Marks) (a) Describe the main causes of inflation. (b) How effective will be the functions of money during inflation. End of Section A 4

5 Section B Answer any 2 questions Question No. 6 (20 Marks) (a) Explain why a policy of protectionism becomes useful to an economy. (b) What are the benefits of free trade? Question No. 7 (20 Marks) (a) Explain (i) The terms of trade. (05 Marks) (ii) Balance of Payments. (05 Marks) (b) What problems are associated in a deficit current account? Question No. 8 (20 Marks) (a) Briefly explain what is meant by a business joint venture with regard to International Business and state four (4) advantages of a business joint venture. (b) Distinguish between direct exports and indirect exports. Question No. 9 (20 Marks) (a) Describe the main macro economic objectives of a government. (b) Explain the type of economic policies that can be used to achieve these macro economic objectives. End of Section B End of Part II End of Question Paper 5