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CA Foundation Unit 1A: Scarcity, Choice and Opportunity Cost — practice questions — page 2

Explore 52 free Unit 1A: Scarcity, Choice and Opportunity Cost questions in CA Foundation Economics. Open each question or exercise to read its content, reference answers and available explanation.

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Unit 1A: Scarcity, Choice and Opportunity Cost questions and exercises with answers

Showing questions 31–52 of 52.

Which of the following is given in the chapter as an example of a coincident indicator?Read the answer and worked solution →According to Keynes, fluctuations in economic activity are primarily caused by fluctuations in:Read the answer and worked solution →Which component of aggregate demand does the chapter describe as the most volatile and a prime cause of business cycles?Read the answer and worked solution →The view that the trade cycle is a purely monetary phenomenon driven by unplanned changes in the money supply is associated in the chapter with:Read the answer and worked solution →The innovation theory, which holds that trade cycles arise from innovations introduced into the system from time to time, is credited in the chapter to:Read the answer and worked solution →Pigou explained business fluctuations chiefly in terms of:Read the answer and worked solution →Demand theory bingoRead the answer and worked solution →Crowd effect or status effect?Read the answer and worked solution →Demand: true or false?Read the answer and worked solution →Knock out the demand mythsRead the answer and worked solution →Complete the law of demandRead the answer and worked solution →Catch the utility effectsRead the answer and worked solution →Match each revenue term to its meaningRead the answer and worked solution →Tap every feature of perfect competitionRead the answer and worked solution →Key in the revenueRead the answer and worked solution →True or false: the competitive firmRead the answer and worked solution →Raises profit or lowers it?Read the answer and worked solution →Which one does NOT belong?Read the answer and worked solution →Tap every feature of perfect competitionRead the answer and worked solution →Which one does NOT belong?Read the answer and worked solution →Tap every central problem of an economyRead the answer and worked solution →Which one does NOT belong?Read the answer and worked solution →

Worked practice questions

Which of the following is given in the chapter as an example of a coincident indicator?

  1. Building permits for houses
  2. Unemployment rate
  3. New orders for plant and equipment
  4. Gross Domestic Product
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Correct answer: D. Gross Domestic Product

1. Coincident indicators move simultaneously with the business cycle and describe its current state. 2. The chapter lists GDP, industrial production, inflation, personal income, retail sales and stock prices as coincident. 3. So Gross Domestic Product is the correct example. 4. Building permits and new orders are ruled out: they are leading indicators. 5. The unemployment rate is ruled out: it is a lagging indicator. _Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 5 "Business Cycles", p.5_

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According to Keynes, fluctuations in economic activity are primarily caused by fluctuations in:

  1. The supply of money
  2. Aggregate effective demand
  3. Agricultural output
  4. The pace of innovations
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Correct answer: B. Aggregate effective demand

1. The chapter attributes to Keynes the view that fluctuations arise from changes in aggregate effective demand. 2. Higher demand raises output, income and employment; lower demand does the reverse. 3. So the correct choice is aggregate effective demand. _Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 5 "Business Cycles", p.7_

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Which component of aggregate demand does the chapter describe as the most volatile and a prime cause of business cycles?

  1. Investment spending
  2. Household consumption
  3. Government transfer payments
  4. Import expenditure
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Correct answer: A. Investment spending

1. Some economists hold that fluctuations in investment are the prime cause of cycles. 2. The chapter states investment spending is the most volatile component of aggregate demand. 3. So the correct choice is investment spending. _Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 5 "Business Cycles", p.7_

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