Glossary of Certifed Administrative Professional exam (CAP

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The distinguishing characteristic of an economic good is
that it is scarec
The law of demand implies that people would
buy less gas if the gasoline tax were raised 6 cents.
Which statement is consistent with the law of demand?
People drive less because of higher gas prices
Goods are
scarce for both poor and rich.
Scarcity means that
human desire for a good is greater than the amount that is freely available.
Which of the following is not a basic question face by each economy?
What goods are subject to the law of demand?
Which factors would not affect the supply of computers?
Increase in consumer income
Which was not a result of the higher prices of gasoline and petroleum-derived products in early 1974?
the demand for used Cadillacs and Lincoln Continentals increased.
Criteria for rationing goods and resources must be established because of
the scarcity imposed by nature
The law of demand refers to

Profit can be defined as
the inverse relationship between the price of a good and the quantity of the good demanded.

the difference between the revenue derived from the sale of a product and the opportunity cost of employing the resources required to produce the product.
According to the law of supply
there is a positive relationship between the price of a good and the amount of it offered for slae by suppliers.
Technological advancements in the production of computer products will cause
the supply curve for computer products to shift to the right.
When a shorrtage of a good exists
if the price is not permitted to rise, nonprice factors such as quality deterioration will play more of a fole in the allocation process.
Under competitive conditions, market prices
generally bring the self-interest of individula consumers and producers into harmony with the general welfare (economic efficiency).
Which of the following exists in a market in which producers have momopoly power?
Product differentiation
Bill said, "If I didn't have a date tonight, I would save $20 and spend this evening playing chess." The opportunity cost of the date is
$20 plus the cost of foregoing a night playing chess
A new hospital is being built in your home town. the opportunity cost of building the new hospital would be
the highest'valued bundle of other goods and services that might be foregone because of the hospital construction
in this diagram, point A is
Whic of the following conditions would be most likely to cause the production possibility curve for corn and beans to shift from AA to BB?
Increasing the capital used to produce corn and beans
Based on the graph below, if the current price of beef was $4 per pound, which of the following conditions would be accurate?
Producers would want to supply more beef tan consumers would wish to buy
In contrast to nominal GNP, real GNP refers to
nominal GNP corrected for price changes.
The consumer price index is a tool designed to measure the extent to which
the cost of a typical bundle ("market basket") o f consumer goods has changed over time.
Which is NOT included in the claculation of net national product?
Disposable income is equal to
personal income - personal taxes.
The real output of goods and services and the real income of resource suppliers
must increase at the same rate for prices to be stable.
Structural unemployment is a result of
an inadequate matching of qualified workers and available jobs.
is measured by changes in the cost of a typical "market basket" of goods at different times
The portion of disposable income a consumer does not spend on current consumption is called
Aggregate demand is equal to
consumption + investment _ govenrment sepnding
The marginal propensity to consume (MPC) is
additional current consumption expenditures divided by additinal current disposable income
Consumption is equal to
disposable income - saving.
which would be considered an investment by an economist?
A corporation buying a car for its sales staff
A planned deficit
would stimulate aggregate demand more than the same level of expenditures with a balanced budget.
Which is not a built-in stabilizer?
The investment multi;lier
According to the supply-side view
expansionary monetary policy will cause real output to expand without causing the rate of inflation to accelerate.
Which would a supply-side fiscalist be most likely to propose as a policy for effectively promoting economic growth and halting inflation during the 1990s?
An across-the-board reduction in government expenditures.
The balanced-budget rule would require Congress to establish tax rates such that
government expenditures and tax revenues were balanced annually
You have been asked to study the production of the economy over the past five years. Why would you use the real GNP series rather than the nominal series?
The nominal series reflects changes in bouth output and prices; the real series reflects changes in output.
Suppose that U.S. policymakers decide that to stimulate the growth rate of the GNP, investment must be increased. What is needed, they conclude, is a reallocation of resources AWAY fron the porduction of consumer goods and TOWARD the production of capita
A higher tax credit allowance for business investment in capital equipment
An economy is currently experiencing a high rate of unemployment as the result of deficient aggregate demand. Which policy alternatives would be most likely to push the economy toward full employment?
A decrease in tax rates, leaving government expenditures unchanged
Which is not a function of money?
It earns income for its holders
The most frequently used monetary tool of the Federal reserve System is
open-market operations
The value (purchasing power) of each unit of money
tends to decline as the money supply expands relative to the availability of goods and services.
The major income-earning asset of financial institutions is
loans outstanding
Which comprise the required reserves of financial institutions?
Vault cash and deposits of the bank with the Federal Reserve
Uncertainty in general business conditions will cause financial institutions to hold excess reserves. Other things constant, this will
tend to reduce the money supply.
Excess reserves of financial institutions are
actual reserves minus required reserves.
A reserve requirement of 20 percent
implies a potential money deposit multi;lier of 5.
The establishment of a stable monetary enviroment is
the responsibility of the Federal Reserve System.
Which is not a function of the Federal Reserve System?
Limiting the national debt
The major purpose of the Federal reserve System si
to regulate the money supply and thereby provide a monetary climate in the best interest of the economy.
Monetary policy
is the major concern of the Federal reserve System.
Open-market operations are
the tool most often used by the Federal reserve System to alter the money supply.
In recent years the primary toos used by the Federal reserve System to control the money supply has been
open-market operations
An expansion in the money supply is desired as part of an antirecession policy.
buy U.S. securitites
Suppose that a member bank of the Federal reserve System has $8,000 in demand deposits, is able to lian out $5,000 of this amount, and still keep $1,000 in excess reserves in the bank. What is the legal reserve requirement?
25 percent
The Federal Reserve System wants to reduce the supply of maoney as part of an anti-inflation policy. The Federal reserve System might
sell U.S. securities
Which statement describes a choice that involves conservation?
Use resources for current or future consumption
which business practices are generally thought to be adverse to consumer interests?
Production of low-quality products
Which is generally not assumend to be a consumer right?
Right to low-priced products
With respect to consumerism
there are both costs and benefits to the consumer.
Increased information about the quality of a product will
help consumers make decisions that result in increasing their welfare.
Which is generally considered a regulation aimed at protecting the consumer?
Licensing of accountants
The economic costs of regulation include
costs of government agencies that enforce regulations.
value of resources used to meet regulations that could be available for another use.
loss of freedom to engage in those activities prohibited by regulation.
Which government agencies is most actively engaged in consumer affairs?
Food and Drug Administration
Which activity is not considered and activity to help consumers?
Providing national defense by government
The major reason for pollution is
lack of property rights.
Three general ways to control pollution are the uses of
direct controls, indirect controls, and extension of property rights.
Which best describes discrimination?
Equals are treated unequally.
A specific example of discrimination in the labor market is
a woman is denied a promotion to manager even though she has the basic qualifications for the position.
Costs of descrimination are borne by
individuals and society together.
Which pieces of legislation has attempted to reduce discrimination?
Age Discrimination Act of 1967
Civil Rights Act of 1964
Vocationa rehabilitation Act of 1973
In a market-oriented economic system
discrimination can never be eliminated.
In an office buliding a number of signs can be found posted in various corridors. Which is the result of consumer action designed to protect the consumer?
"No smoking in elevator"
ABC Autos, Inc. is a retail automobile dealership. A series of sales promotions is being developed and considered for use in promoting the slae of new automobiles. Which statement most likely represents deceptive advertising?
"No money down!" You can drive it away for $199 a month plus a moderat finance charge
An increasi in the tariff on foreigh-produced automobiles would be least likely to benefit
domestic consumers of automobiles
Each trading nation can gain by specializing in the production of those items for which they are low-opportunity-cost producers while trading for those things for which they are high-opportunity-cost producers. This statement is best describes the implic
the law of comparative advantage
A trade policy that reduces government-imposed restrictions preventing foreign goods from freely entering the U.S. market ( for example, a reduction in tariffs) will
enhamce economic efficiency by allocationg more resources to the areas of their greatest comparative advantage.
Which is not an argument for protecting certain domestic industries from foreign competitors?
The law of comparative advantage
The share of GNP in the United States that results from exports is approximately
10 percent
Specialization and trade, according to comparative advantage, tend to reduce cost while directing each output toward its highest valued use. Thus, total benefits increase while total output
increases in the trading regions.
The law of comparative advantage explains why a nation will benefit from trade when
it exports goods for which it is a low-opportunity-cost productr while importing those for which it is a high-opportunity-cost producer.
Which is a credit to a government's balance of payments?
Purchase of U.S. stock by an English citizen
For which reason do producers export goods to other nations?
They export goods because they plan to use the compensation received as pay.
Which does not restrict the volume of international trade?
A stable international menetary framework
A tariff differs from a quota in that
a tariff is a tax imposed on imports, wheareas a quota is an absolute limit to the number of units of a godd that can be imported.
The ifant-industry argument about tariffs states that
tariffs should be levied on foreign porducts that compete with new domestic industries.
Suppose that the United States imposed a tariff on television sets, preventing foreign-porduced television sets from freely entering the U.S. market. Which would be most likely to occur?
The price of television sets to U.S. consumers would increase, and the demand for U.S. export products would fall.
Suppose that the Swiss government subsidized the watchmaking industry, enabling Swiss producers to undersell foreign watch producers. A watch-importing nation would take bestg advantage of the Swiss subsidization policy by
gladly accepting the subsidy of the Swiss government, displacing the appropriate adjustment for the resources temporarily from the domestic watchmaking industry.
A no-trade situation exists in which the U.S. exports wheat to a froeign country. The U.S. domestic price
and output of wheat would rise.
A situation exists where labor-intensive textile products can be produced cheaply in low-wage countries tan in the United States. The United States would gain if it
used its resources to produce other items, while importing textiles from foreigners.
The process that involves identifying, recording, measuring,and communicationg financial information is
The principle which requires that the acconting method used be the one least likely to overstate income and financial postions is caleed
the conservatism principle.
The accounting concept which states that accounting information should pertain to the problem at hand and provide useful information about the problem is
The accounting princple which requires that once an accounting or reporting method is selected it should be used from one period to another is
Accounting reports issued solely for use by the management of a company are called
internal reports.
The going-concern assumption
states that the accountant assumes that e the entity will exist for an indefinite period of time.
Generally accepted accounting principles
are currently set by the Financial Accounting Standards Board.
A corporation
is a seperate legal entity.
normally has the same rights and obligations as an individual.
requires obtaining a corporate charter.
The principal function of an independent CPA is to
conduct an audit to determine whether the company's financial statements are presented fairly in accordance with GAAP.
Lew Co. purchased a plot of land for $100,000 five years ago. The appraised value of the land at that time was $105,000. Land in this area is generally worth about 50 percent more today than it was five years ago. The value of the land on Lew Co.

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