CPA Business Environment and Concepts (BEC) : CPA Business Environment and Concepts (BEC)
Study concepts, example questions & explanations for CPA Business Environment and Concepts (BEC)
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Example Questions
Example Question #4 : Money, Banking Fiscal Policy
Which one of the following is not one of Porter's five forces?
Bargaining power of customers
Existence of a substitute product
Barriers to market entry
Existence of complementary products
Existence of complementary products
Existence of complementary products is not one of Porter's five forces.
Example Question #6 : Economic Concepts & Analysis
When will new companies attempt to enter a market?
When there is an ologopoly
When there is monopolistic competition
When the economy is weak
When the economy is strong
When there is monopolistic competition
Under monopolistic competition, barriers to entry are low, and potentially high profits exist in the market. This would incentivize new firms to enter the market.
Example Question #1 : Consumer Price Index
All of the following are components of the formula used to calculate gross domestic product except:
Foreign net export spending
Household income
Gross investment
Government spending
Household income
GDP calculated through the expenditure approach includes all of the following except household income.
Example Question #2 : Consumer Price Index
What does the consumer price index measure?
Cost of capital
Average household income
Prime rate of interest
Rate of inflation
Rate of inflation
The CPI is a measure of the inflation rate (the percentage change of the consumer price index from one period to the next.)
Example Question #1 : Economic Concepts & Analysis
Which of the following is correct regarding the CPI for measuring the estimated decrease in a company's buying power?
The CPI is skewed by foreign currency transactions
The CPI is measures once every 10 years
The products a company buys should differ from what a consumer buys
The CPI measures what consumers will pay for items
The products a company buys should differ from what a consumer buys
The CPI measures the costs of a market basket of specific goods commonly purchased by consumers.
Example Question #4 : Consumer Price Index
The CPI rises from 131 in year 1 to 136.5 in year 2. What is the annual inflation rate?
13.80%
3%
4.20%
1.38%
4.20%
(136.5-131)/131 * 100 = 4.2%
Example Question #5 : Consumer Price Index
If the nominal interest rate is 10% and the rate of inflation is 5%, the real interest rate is:
5%
50%
15%
2%
5%
The real interest rate is equal to the nominal interest rate minus inflation.
Example Question #2 : Consumer Price Index
Under perfect or pure competition, ____ suppliers and customers act independently and there are ____ barriers to entry.
Plenty of, plenty of
Plenty of, no
No, plenty of
No, no
Plenty of, no
Under perfect or pure competition, plenty of suppliers and customers act independently and there are no barriers to entry.
Example Question #1 : Globalization
Globalization is often measured using the following metric:
Exports as a percentage of imports
World trade growth as a percentage of GDP
Shifts in global supply and demand curves
Exchange rate velocity
World trade growth as a percentage of GDP
Globalization represents the increased dispersion and integration of the world's economies. It is often measured as the growth in world trade as a percentage of GDP.
Example Question #1 : Globalization
Each of the following is an effect from opening markets to foreign investment except:
A decrease in investment growth rates
A change in the volatility of emerging stock market returns
A decrease in local firms' cost of capital
An increase in the correlation of emerging stock markets with world markets
A decrease in investment growth rates
Under this circumstance, investment growth rates will likely increase rather than decrease as there are more opportunities for investment and growth.
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