BA1 - Fundamentals of Business Economics Question Tutorial: CIMAPRO17-BA1-X1-ENG

Company A owns a factory in a foreign country. Which of the following types of exchange rate risk is company A most likely to experience in relation to the value of the factory?

A. Economic risk

B. Energy risk

C. Transaction risk

D. Translation risk

Conflict between the objectives of shareholders and those of management in a company may arise because:

A. shareholders are always interested in the short term but those in management are interested in the long term.

B. managers are concerned with the level of profits but shareholders are only interested in the long term share price.

C. raising the pay of management may be incompatible with increasing shareholder value.

D. managers are more concerned with day to day management than shareholders.

Which TWO of the following policy actions might be available to a government that wishes to reduce a deficit in the balance of payments? (Choose two.)

A. Devaluate the exchange rate in order to increase exports.

B. Increase the money supply in order to stimulate domestic consumption.

C. Appreciate the exchange rate in order to reduce imports.

D. Reduce the interest rate in order to stimulate investment.

E. Introduce tariffs on imported goods in order to favour domestic producers.