Measuring and Managing Economic Exposure49425345

曼昆《经济学原理》（宏观）第五版测试题库（23）Chapter 23Measuring a Nation's IncomeTRUE/FALSE1. In years of economic contraction, firms throughout the economy increase their production of goods and services, employment rises, and jobs are easy to find.ANS: F DIF: 1 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Economic expansion MSC: Definitional2. Macroeconomic statistics include GDP, the inflation rate, the unemployment rate, retail sales, and the trade deficit.ANS: T DIF: 1 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Macroeconomics MSC: Definitional3. Macroeconomic statistics tell us about a particular household, firm, or market.ANS: F DIF: 1 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Macroeconomics MSC: Definitional4. Macroeconomics is the study of the economy as a whole.ANS: T DIF: 1 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Macroeconomics MSC: Definitional5. The goal of macroeconomics is to explain the economic changes that affect many households, firms, and markets simultaneously.ANS: T DIF: 1 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Macroeconomics MSC: Definitional6. Microeconomics and macroeconomics are closely linked.ANS: T DIF: 1 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Microeconomics | Macroeconomics MSC: Definitional7. The basic tools of supply and demand are as central to macroeconomic analysis as they are to microeconomic analysis.TOP: Demand | Supply MSC: Definitional8. GDP is the most closely watched economic statistic because it is thought to be the best single measure of asociety’s economic well-being.ANS: T DIF: 1 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Definitional9. GDP can measure either the total income of everyone in the economy or the total expenditure on theeconomy’s output of goods and services, but GDP cannot measure both at the same time.ANS: F DIF: 2 REF: 23-1NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Interpretive10. For an economy as a whole, income must exceed expenditure.ANS: F DIF: 1 REF: 23-1NAT: Analytic LOC: The study of economics and definitions of economics11. An economy’s income is the same as its expenditure because every transaction has a buyer and a seller. ANS: T DIF: 1 REF: 23-1NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Income | Expenditure MSC: Definitional12. GDP is the market value of all final goods and services produced by a country’s citizens in a given period oftime.ANS: F DIF: 1 REF: 23-2NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Definitional13. GDP adds together many different kinds of products into a single measure of the value of economic activity byusing market prices.ANS: T DIF: 1 REF: 23-2NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Definitional14. U.S. GDP includes the market value of rental housing, but not the market value of owner-occupied housing. ANS: F DIF: 2 REF: 23-2NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Interpretive15. U.S. GDP excludes the production of most illegal goods.ANS: T DIF: 2 REF: 23-2NAT: Analytic LOC: The study of economics and definitions of economics16. U.S. GDP includes estimates of the value of items that are produced and consumed at home, such as housework and car maintenance.ANS: F DIF: 2 REF: 23-2NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Applicative17. GDP includes only the value of final goods because the value of intermediate goods is already included in the prices of the final goods.ANS: T DIF: 1 REF: 23-2NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP | Intermediate goods MSC: Definitional18. Additions to inventory subtract from GDP, and when the goods in inventory are later used or sold, the reductions in inventory add to GDP.ANS: F DIF: 1 REF: 23-2NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP | Inventory MSC: Definitional19. While GDP includes tangible goods such as books and bug spray, it excludes intangible services such as the services provided by teachers and exterminators.ANS: F DIF: 2 REF: 23-2NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Applicative20. At a rummage sale, you buy two old books and an old rocking chair; your spending on these items is not included in current GDP.ANS: T DIF: 2 REF: 23-2NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Applicative21. When an American doctor opens a practice in Bermuda, his production there is part of U.S. GDP.ANS: F DIF: 2 REF: 23-2NAT: Analytic LOC: The study of economics and definitions of economics1560 Chapter 23 /Measuring a Nation's Income22. If the U.S. government reports that GDP in the third quarter was $12 trillion at an annual rate, then the amount of income and expenditure during quarter three was $3 trillion.ANS: T DIF: 2 REF: 23-2NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Applicativedifferent stories about overall economic conditions.ANS: F DIF: 2 REF: 23-2NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP | Income MSC: Interpretive24. Expenditures by households on education are included in the consumption component of GDP.ANS: T DIF: 2 REF: 23-3NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Consumption MSC: Interpretive25. Most goods whose purchases are included in the investment component of GDP are used to produce other goods.ANS: T DIF: 2 REF: 23-3NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Investment MSC: Interpretive26. New home construction is included in the consumption component of GDP.ANS: F DIF: 2 REF: 23-3NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Investment MSC: Interpretive27. Changes in inventory are included in the investment component of GDP.ANS: T DIF: 2 REF: 23-3NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Investment MSC: Interpretive28. The investment component of GDP refers to financial investment in stocks and bonds.ANS: F DIF: 2 REF: 23-3NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Investment MSC: Interpretive29. The government purchases component of GDP includes salaries paid to soldiers but not Social Security benefits paid to the elderly.ANS: T DIF: 2 REF: 23-3NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Government purchases MSC: Interpretive30. If the value of an economy’s imports exceeds the value of that economy’s exports, then net exports is a negative number.ANS: T DIF: 2 REF: 23-3NAT: Analytic LOC: The study of economics and definitions of economics31. If someone in the United States buys a surfboard produced in Australia, then that purchase is included in both the consumption component of U.S. GDP and the net exports component of U.S. GDP.ANS: T DIF: 2 REF: 23-3NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Consumption | Net exports MSC: Applicative32. If consumption is $4000, exports are $300, government purchases are $1000, imports are $400, and investment is $800, then GDP is $5700.ANS: T DIF: 2 REF: 23-3NAT: Analytic LOC: The study of economics and definitions of economics33. If exports are $500, GDP is $8000, government purchases are $1200, imports are $700, and investment is $800, then consumption is $6200.ANS: T DIF: 2 REF: 23-3NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Consumption MSC: Applicative34. If consumption is $1800, GDP is $4300, government purchases are $1000, imports are $700, and investment i s $1200, then exports are $300.ANS: F DIF: 2 REF: 23-3NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Exports MSC: Applicative35. U.S. GDP was almost $14 billion in 2007.ANS: F DIF: 1 REF: 23-3NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Definitional36. In 2007, government purchases was the largest component of U.S. GDP.ANS: F DIF: 2 REF: 23-3NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Interpretive37. If total spending rises from one year to the next, then the economy must be producing a larger output of goods and services.ANS: F DIF: 2 REF: 23-4NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Interpretive38. An increase in nominal U.S. GDP necessarily implies that the United States is producing a larger output of goods and services.TOP: Nominal GDP MSC: Interpretive39. Nominal GDP uses constant base-year prices to place a value on the economy’s production of goods a nd services, while real GDP uses current prices to place a value on the economy’s production of goods and services.ANS: F DIF: 1 REF: 23-4NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Nominal GDP | Real GDP MSC: Definitional40. Real GDP evaluates current production using prices that are fixed at past levels and therefore shows how the economy’s overall production of goods and services changes over time.ANS: T DIF: 1 REF: 23-4NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Real GDP MSC: Definitional41. The term real GDP refers to a country’s actual GDP as opposed to its estimated GDP.ANS: F DIF: 2 REF: 23-4NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Real GDP MSC: Interpretive42. Changes in real GDP reflect only changes in the amounts being produced.ANS: T DIF: 1 REF: 23-4NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Real GDP MSC: Definitional43. Real GDP is a better gauge of economic well-being than is nominal GDP.ANS: T DIF: 1 REF: 23-4NAT: Analytic LOC: The study of economics and definitions of economics1562 Chapter 23 /Measuring a Nation's Income44. Changes in the GDP deflator reflect only changes in the prices of goods and services.ANS: T DIF: 2 REF: 23-4NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP deflator MSC: Interpretive45. If nominal GDP is $10,000 and real GDP is $8,000, then the GDP deflator is 125.ANS: T DIF: 2 REF: 23-4NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP deflator MSC: Applicative46. If nominal GDP is $12,000 and the GDP deflator is 80, then real GDP is $15,000.TOP: Real GDP MSC: Applicative47. Economists use the term inflation to describe a situation in whic h the economy’s overall production level isrising.ANS: F DIF: 1 REF: 23-4NAT: Analytic LOC: Unemployment and inflation TOP: InflationMSC: Definitional48. If the GDP deflator in 2006 was 160 and the GDP deflator in 2007 was 180, then the inflation rate in 2007 was12.5%.ANS: T DIF: 2 REF: 23-4NAT: Analytic LOC: Unemployment and inflation TOP: Inflation rateMSC: Applicative49. If the GDP deflator in 2004 was 150 and the GDP deflator in 2005 was 120, then the inflation rate in 2005 was25%.ANS: F DIF: 2 REF: 23-4NAT: Analytic LOC: Unemployment and inflation TOP: Inflation rateMSC: Applicative50. The GDP deflator can be used to take inflation out of nominal GDP.ANS: T DIF: 1 REF: 23-4NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP deflator MSC: Definitional51. In 2004, the level of U.S. real GDP was close to four times its 1965 l evel.ANS: T DIF: 1 REF: 23-4NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Real GDP MSC: Definitional52. The output of goods and services produced in the United States has grown on average 3.2 percent per year. ANS: T DIF: 1 REF: 23-4NAT: Analytic LOC: Productivity and growthTOP: GrowthMSC: Definitional53. Periods during which real GDP rises are called recessions.ANS: F DIF: 1 REF: 23-4NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Recessions MSC: Definitional54. Recessions are associated with lower incomes, rising unemployment, and falling profits.TOP: Recessions MSC: Definitional55. If real GDP is higher in one country than in another, then we can be sure that the standard of living is higher inthe country with the higher real GDP.ANS: F DIF: 2 REF: 23-5NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Real GDP | Standard of living MSC: Interpretive56. Real GDP per person tells us the income and expenditure of the average person in the economy.ANS: T DIF: 1 REF: 23-5NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Real GDP per person MSC: Definitional57. GDP does not directly measure those things that make life worthwhile, but it does measure our ability toobtain many of the inputs into a worthwhile life.ANS: T DIF: 1 REF: 23-5NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Definitional58. GDP does not make adjustments for leisure time, environmental quality, or volunteer work.ANS: T DIF: 2 REF: 23-5NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Interpretive59. Other things equal, in countries with higher levels of real GDP per person, life expectancy and literacy ratesare higher than in countries with lower levels of real GDP per person.ANS: T DIF: 2 REF: 23-5NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: InterpretiveSHORT ANSWER1. GDP is defined as the market value of all final goods and services produced within a country in a given periodof time. In spite of this definition, some production is left out of GDP. Explain why some final goods and services are not included.ANS:GDP excludes some products because they are so difficult to measure. These products include services performed by individuals for themselves and their families, and most goods that are produced and consumed at home and, therefore, never enter the marketplace. In addition, illegal products are not included in GDP even if they can be measured because, by society's definition, they are bads, not goods.DIF: 2 REF: 23-2 NAT: AnalyticLOC: The study of economics and definitions of economics TOP: GDPMSC: Interpretiveincluded directly as part of GDP, but the value of intermediate goods produced and not sold is includeddirectly as part of GDP.ANS:Intermediate goods produced and sold during the year are not included separately as part of GDP because the value of those goods is included in the value of the final goods produced from them. If the intermediate good is produced but not sold during the year, its value is included as inventory investment for the year in which it was produced. If inventory investment was not included as part of GDP, true production would be underestimated for the year the intermediate good went into inventory, and overestimated for the year the intermediate good is used or sold.DIF: 2 REF: 23-2 NAT: AnalyticLOC: The study of economics and definitions of economics TOP: GDP | Intermediate goods MSC: Interpretive1564 Chapter 23 /Measuring a Nation's Income3. Since it is counted as investment, why doesn't the purchase of earthmoving equipment from China by a U.S.corporation increase U.S. GDP?ANS:The purchase of foreign equipment is counted as investment, but GDP measures only the value of production within the geographic borders of the United States. In order to avoid including the value of the imported equipment, imports are subtracted from GDP. Hence, the value of the equipment in investment is canceled by subtracting its value as an import.DIF: 2 REF: 23-3 NAT: AnalyticLOC: The study of economics and definitions of economics TOP: GDP | Investment | Imports MSC: Applicative4. Identify the immediate effect of each of the following events on U.S. GDP and its components.a. James receives a Social Security check.b. John buys an Italian sports car.c. Henry buys domestically produced tools for his construction company.ANS:a. Since this is a transfer payment, there is no change to GDP or to any of its components.b. Consumption and imports will rise and cancel each other out so that there is no change in U.S. G DP.c. This increases the investment component of GDP and so increases GDP.DIF: 2 REF: 23-3 NAT: AnalyticLOC: The study of economics and definitions of economicsTOP: GDP | Transfer payments | Net exports | Investment MSC: Applicative5. Between 1929 and 1933, NNP measured in current prices fell from $96 billion to $48 billion. Over the sameperiod, the relevant price index fell from 100 to 75.a. What was the percentage decline in nominal NNP from 1929 to1933?b. What was the percentage decline in real NNP from 1929 to 1933? Show your work.ANS:a. NNP measured in current prices is nominal NNP. Nominal NNP fell from $96 billion to $48 billion, adecline of 50 percent.($96 b/100) 100 = $96 b. Real NNP in 1933 was ($48 b/75) 100 = $64 b. Real NNP fell from$96 billion to $64 billion, a decline of 33 percent.DIF: 2 REF: 23-4 NAT: AnalyticLOC: The study of economics and definitions of economics TOP: Nominal NNP | Real NNP MSC: Applicative6. You find that your paycheck for the year is higher this year than last. Does that mean that your real incomehas increased? Explain carefully.ANS:Real income is nominal income adjusted for general increase in prices. I f my paycheck is higher this year than last, my nominal income has increased. Whether my real income has increased or not depends on what has happened since last year to the level of prices of things I buy with my income. If the percentage increase in prices is less than the percentage increase in my nominal income, then my real income h as increased. Otherwise, my real income has not increased.DIF: 2 REF: 23-4 NAT: AnalyticLOC: The study of economics and definitions of economicsTOP: Nominal income | Real income MSC: Interpretive7. U.S. real GDP is substantially higher today than it was 60 years ago. What does this tell us, and what does itnot tell us, about the well-being of U.S. residents?ANS:Since this is in real terms, it tells us that the U.S. is able to make a lot more stuff than in the past. Some of the increase in real GDP is probably due to an increase in population, so we could say more if we knew what had happened to real GDP per person. Supposing that there was also an increase in real GDP per person, we can say that the standard of living has risen. Material things are an important part of well-being. Having sufficient amounts of things such as food, shelter, and clothing are fundamental to well-being. Other things such as security, a safe environment, access to safe water, access to medical care, justice, and freedom also matter. However, many of these things are more easily obtained by being able to produce more using fewer resources. Countries with higher real GDP per person tend to have longer life spans, less discrimination towards women, less child labor, and a higher rate of literacy.DIF: 2 REF: 23-5 NAT: AnalyticLOC: The study of economics and definitions of economicsTOP: Real GDP | Economic welfare MSC: InterpretiveSec00 - Measuring a Nation's IncomeMULTIPLE CHOICE1. Statistics that are of particular interest to macroeconomistsa. are largely ignored by the media.b. are widely reported by the media.c. include the equilibrium prices of individual goods and services.d. tell us about a particular household, firm, or market.ANS: B DIF: 2 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Macroeconomics MSC: Interpretiveb. the interaction between households and firms.c. economy-wide phenomena.d. regulations on firms and unions.ANS: C DIF: 1 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Macroeconomics MSC: Definitional3. Which of the following newspaper headlines is more closely related to what microeconomists study than to what macroeconomists study?a. Unemployment rate rises from 5 percent to 5.5 percent.b. Real GDP grows by 3.1 percent in the third quarter.c. Retail sales at stores show large gains.d. The price of oranges rises after an early frost.ANS: D DIF: 2 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Microeconomics | Macroeconomics MSC: Interpretive4. Which of the following questions is more likely to be studied by a microeconomist than a macroeconomist?a. Why do prices in general rise by more in some countries than in others?b. Why do wages differ across industries?c. Why do production and income increase in some periods and not in others?d. How rapidly is GDP currently increasing?ANS: B DIF: 2 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Microeconomics | Macroeconomics MSC: Interpretive1566 Chapter 23 /Measuring a Nation's Income5. Which of the following topics are more likely to be studied by a macroeconomist than by a microeconomist?a. the effect of taxes on the prices of airline tickets, the profitability of automobile-manufacturingfirms, and employment trends in the food-service industryb. the price of beef, wage differences between genders, and antitrust lawsc. how consumers maximize utility, and how prices are established in markets for agriculturalproductsd. the percentage of the labor force that is out of work, and differences in average income fromcountry to countryANS: D DIF: 2 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Microeconomics | Macroeconomics MSC: Interpretive6. We would expect a macroeconomist, as opposed to a microeconomist, to be particularly interested ina. explaining how economic changes affect prices of particular goods.b. devising policies to deal with market failures such as externalities and market power.c. devising policies to promote low inflation.d. identifying those markets that are competitive and those that are not competitive.ANS: C DIF: 2 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Microeconomics | Macroeconomics MSC: Interpretive7. Which of the following is not a question that macroeconomists address?a. Why is average income high in some countries while it is low in others?b. Why does the price of oil rise when war erupts in the Middle East?c. Why do production and employment expand in some years and contract in others?d. Why do prices rise rapidly in some periods of time while they are more stable in other periods? ANS: B DIF: 2 REF: 23-0 NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Macroeconomics MSC: Interpretive8. The basic tools of supply and demand area. useful only in the analysis of economic behavior in individual markets.b. useful in analyzing the overall economy, but not in analyzing individual markets.c. central to microeconomic analysis, but seldom used in macroeconomic analysis.d. central to macroeconomic analysis as well as to microeconomic analysis.ANS: D DIF: 1 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Demand | Supply MSC: Definitional9. Which of the following statistic is usually regarded as the best single measure of a society’s economic well-being?a. the unemployment rateb. the inflation ratec. gross domestic productd. the trade deficitANS: C DIF: 1 REF: 23-0NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: DefinitionalSec01 - Measuring a Nation's Income - The Economy's Income and Expenditure MULTIPLE CHOICE1. Which of the following statements about GDP is correct?a. GDP measures two things at once: the total income of everyone in the economy and the unemployment rate of the economy’s labor force.b. Money continuously flows from households to government and then back to households, and GDP measures this flow of money.c. GDP is to a nation’s economy as household income is to a household.d. All of the above are correct.ANS: C DIF: 2 REF: 23-1NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Interpretive2. Gross domestic product measures two things at once:a. the total spending of everyone in the economy and the total saving of everyone in the economy.b. the total income of everyone in the economy and the total expenditure on the economy's output of goods and services.c. the value of the economy's output of goods and services for domestic citizens and the value of the economy's output of goods and services for the rest of the world.d. the total income of households in the economy and the total profit of firms in the economy. ANS: B DIF: 1 REF: 23-1NAT: Analytic LOC: The study of economics and definitions of economicsTOP: GDP MSC: Definitional3. For an economy as a whole,a. wages must equal profit.b. consumption must equal saving.c. income must equal expenditure.d. the number of buyers must equal the number of sellers.ANS: C DIF: 2 REF: 23-1NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Income | Expenditure MSC: Interpretive4. For an economy as a whole, income must equal expenditure becausea. the number of firms is equal to the number of households in an economy.b. international law requires that income equal expenditure.c. every dollar of spending by some buyer is a dollar of income for some seller.d. every dollar of saving by some consumer is a dollar of spending by some other consumer. ANS: C DIF: 2 REF: 23-1NAT: Analytic LOC: The study of economics and definitions of economicsTOP: Income | Expenditure MSC: Interpretive5. If an economy’s GDP rises, then it must be the case that the economy’sa. income rises and saving falls.b. income and saving both rise.c. income rises and expenditure falls.d. income and expenditure both rise.ANS: D DIF: 2 REF: 23-1NAT: Analytic LOC: The study of economics and definitions of economics TOP: Income | Expenditure MSC: Interpretive。

15 MEASURING GDP AND ECONOMIC GROWTH* * This is Chapter 21 in Economics .S o l u t i o n s t o t h e O d d -N u m b e r e d P r o b l e m s1. a. Aggregate expenditure is $10,198 billion.Aggregate expenditure is the sum of consumption expenditure, investment, governmentexpenditure, and net exports. In the figure, B is consumption expenditure, D is investment, C is government expenditure, and E is net exports. Therefore aggregate expenditure equals$7,064 billion plus $1,624 billion plus $1,840 billion plus −$330 billion, which is $10,198 billion.b. Aggregate income is $10,198 billion.Aggregate income equals aggregate expenditure, which from 1(a) is $10,198 billion.c. GDP is $10,198 billion.GDP equals aggregate expenditure, which from 1(a) is $10,198 billion.d. Government budget deficit is −$360 billion, that is, a government budget surplus of $360billion.The government budget deficit equals government expenditures minus net taxes. C isgovernment expenditure, and A is net taxes. So the government budget deficit equals $1,840 billion minus $2,200 billion, which is −$360 billion, that is, the government had agovernment budget surplus of $360 billion.e. Household saving is $934 billion.Household saving equals aggregate income minus consumption expenditure minus net taxes. From 1(b), income is $10,198 billion. In the figure, B is consumption expenditure and A is net taxes. Therefore household saving equals $10,198 billion minus $7,064 billion minus$2,200 billion, which is $934 billion.f. Government saving is $360 billion.Government saving equals taxes minus government expenditure. In the figure, A is net taxes and C is government expenditure. Therefore government saving equals $2,200 billion minus $1,840 billion, which is $360 billion.g. National saving is $1,294 billion.National saving equals the sum of household saving and government saving. Householdsaving is $934 billion (see answer 1e). Government saving is $360 billion (see answer 1f). Therefore national saving equals $934 billion plus $360 billion, which is $1,294 billion.h. Borrowing from the rest of the world is $330 billion.Borrowing from the rest of the world equals minus net exports. E is net exports, and netexports equals −$330 billion. We are in deficit, so foreigners are in surplus and we must borrow from them to pay for our deficit. C h a p t e r3. Martha’s initial capital stock is 10 copiers, depreciation is 1 copier per year, gross investment is 5copiers, net investment is 4 copiers, and the final capital stock is 14 copiers. Final capital stockequals initial capital stock plus net investment. Net investment equals gross investment minusdepreciation.5. a. Ecoland’s GDP is $1,100,000.GDP equals the sum of consumption expenditure plus investment plus governmentexpenditure plus exports minus imports. That is, GDP equals $600,000 plus $250,000 plus$200,000 plus $300,000 minus $250,000. GDP equals $1,100,000.b. Expenditure approach. The income approach cannot be used because there are no data oninterest, rent, depreciation, and indirect taxes and subsidies.c. Investment is financed by private saving plus government saving plus borrowing from therest of the world.Private saving equals GDP minus consumption expenditure minus net taxes. Net taxes equaltaxes ($250,000) minus transfer payments ($50,000), which is $200,000. So private saving is$300,000. Government saving equals the budget surplus, which equals net taxes minusgovernment expenditure. Government saving equals net taxes ($200,000) minus governmentexpenditure ($200,000), which is zero. Private saving exceeds investment by $50,000 andthis amount is lent to the rest of the world.7. a. The growth rate of real GDP in 2006 is 6.79 percent.The chain-weighted output index method uses the prices of 2005 and 2006 to calculate thegrowth rate in 2006.The value of the 2005 quantities at 2005 prices is $7,000. The value of the 2006 quantities at2005 prices is $7,450. We now compare these values. The increase in the value is $450. Thepercentage increase is ($450 ÷ $7,000) × 100, which is 6.43 percentThe value of the 2005 quantities at 2006 prices is $7,000. The value of the 2006 quantities at2006 prices is $7,500. We now compare these values. The increase in the value is $500. Thepercentage increase is ($500 ÷ $7,000) × 100, which is 7.14 percent.The chain-weighted output index calculates the growth rate as the average of these twopercentage growth rates. That is, the growth rate in 2006 is 6.79 percentb. The GDP deflator in 2006 is 100.33.GDP deflator equals nominal GDP in 2006 divided by real GDP in 2006, multiplied by 100.Real GDP in 2006 is 6.79 percent higher than real GDP in 2005. Real GDP in 2005 is$7,000, so real GDP in 2006 is $7,475.3.GDP deflator equals ($7,500 ÷ $7,475.3) × 100 = 100.33.c. Real GDP in 2006 using the base-year prices method is $7,450. Real GDP in 2006 using thechain-weighted output index method is $7,475.3. The base-year prices method measure realGDP growth as being slower than the chain-weighted index measure.2。

Chapter 12—Managing Economic Exposure and Translation Exposure1. Depreciation of the euro relative to the U.S. dollar will cause a U.S.-based multinational firm'sreported earnings (from the consolidated income statement) to ____. If a firm desired to protect against this possibility, it could stabilize its reported earnings by ____ euros forward in the foreign exchange market.a. be reduced; purchasingb. be reduced; sellingc. increase; sellingd. increase; purchasingANS: B PTS: 12. Springfield Co., based in the U.S., has a cost from orders of foreign material that exceeds its foreignrevenue. All foreign transactions are denominated in the foreign currency of concern. This firm would ____ a stronger dollar and would ____ a weaker dollar.a. benefit from; be unaffected byb. benefit from; be adversely affected byc. be unaffected by; be adversely affected byd. be unaffected by; benefit frome. benefit from; benefit fromANS: B PTS: 13. Whitewater Co. is a U.S. company with sales to Canada amounting to C$8 million. Its cost ofmaterials attributable to the purchase of Canadian goods is C$6 million. Its interest expense onCanadian loans is C$4 million. Given these exact figures above, the dollar value of Whitewater's"earnings before interest and taxes" would ____ if the Canadian dollar appreciates; the dollar value of Whitewater's cash flows would ____ if the Canadian dollar appreciates.a. increase; increaseb. decrease; increasec. decrease; decreased. increase; decreasee. increase; be unaffectedANS: D PTS: 14. Sycamore (a U.S. firm) has no subsidiaries and presently has sales to Mexican customers amounting toMXP98 million, while its peso-denominated expenses amount to MXP41 million. If it shifts itsmaterial orders from its Mexican suppliers to U.S. suppliers, it could reduce peso-denominatedexpenses by MXP12 million and increase dollar-denominated expenses by $800,000. This strategywould ____ the Sycamore's exposure to changes in the peso's movements against the U.S. dollar.Regardless of whether the firm shifts expenses, it is likely to perform better when the peso is valued ____ relative to the dollar.a. reduce; highb. reduce; lowc. increase; lowd. increase; highANS: D PTS: 15. Which of the following is an example of economic exposure but not an example of transactionexposure?a. An increase in the dollar's value hurts a U.S. firm's domestic sales because foreigncompetitors are able to increase their sales to U.S. customers.b. An increase in the pound's value increases the U.S. firm's cost of British pound payables.c. A decrease in the peso's value decreases a U.S. firm's dollar value of peso receivables.d. A decrease in the Swiss franc's value decreases the dollar value of interest payments on aSwiss deposit sent to a U.S. firm by a Swiss bank.ANS: A PTS: 16. Rockford Co. is a U.S. manufacturing firm that produces goods in the U.S. and sells all products toretail stores in the U.K.; the goods are denominated in pounds. It finances a small portion of itsbusiness with pound-denominated loans from British banks. Which of the following is true? (Assume that the amount of products to be sold is guaranteed by contracts.)a. The dollar value of sales is higher if the pound depreciates against the dollar.b. The dollar value of sales is unaffected by the pound's exchange rate.c. A and Bd. None of the aboveANS: D PTS: 17. If a U.S. firm's expenses are more susceptible to exchange rate movements than revenue, the firm will____ if the dollar ____.a. benefit; weakensb. be unaffected; weakensc. be unaffected; strengthensd. benefit; strengthensANS: D PTS: 18. Laketown Co. has some expenses and revenue in euros. If its expenses are more sensitive to exchangerate movements than revenue, it could reduce economic exposure by ____. If its revenues are more sensitive than expenses, it could reduce economic exposure by ____.a. decreasing foreign revenues; decreasing foreign expensesb. decreasing foreign revenues; increasing foreign expensesc. increasing foreign revenues; decreasing foreign revenuesd. decreasing foreign expenses; increasing foreign revenuesANS: D PTS: 19. Any restructuring of operations that ____ the difference between a foreign currency's inflows andoutflows may ____ economic exposure.a. reduces; increaseb. increases; reducec. reduces; reduced. A and Be. none of the aboveANS: C PTS: 110. It is generally least difficult to effectively hedge various types of:a. translation exposure.b. transaction exposure.c. economic exposure.d. A and CANS: B PTS: 111. With regard to hedging translation exposure, translation losses ____, and gains on forward contractsused to hedge translation exposure ____.a. are not tax deductible; are taxedb. are tax deductible; are taxedc. are not tax deductible; are not taxedd. are tax deductible; are not taxedANS: A PTS: 112. If a firm does not have foreign subsidiaries, it is not subject to ____.a. transaction exposureb. economic exposurec. A and Bd. translation exposureANS: D PTS: 113. If the Singapore dollar appreciates against the U.S. dollar over this year, the consolidated earnings of aU.S. company with a subsidiary in Singapore will be ____ as a result of the exchange rate movement.a. negativeb. adversely affectedc. favorably affectedd. unaffectedANS: C PTS: 114. Assume a U.S. firm uses a forward contract to hedge all of its translation exposure. Also assume thatthe firm underestimated what its foreign earnings would be. Assume that the foreign currencydepreciated over the year. The firm would generate a translation ____, which would be ____ than the gain generated by the forward contract.a. loss; smallerb. loss; largerc. gain; largerd. gain; smallerANS: B PTS: 115. A perfect hedge (full coverage) on translation exposure can usually be achieved when:a. using the money market hedge.b. using the forward hedge.c. using the futures hedge.d. none of the above, since a perfect hedge is nearly impossible.ANS: D PTS: 116. Assume that a Japanese car manufacturer exports cars to U.S. dealerships, which are priced in yen.The demand for those cars declines when the yen is strong. The manufacturer also produces some cars in the U.S. with U.S. materials and those cars are priced in dollars. The manufacturer could reduce its economic exposure by:a. closing down most of its plants in the U.S.b. producing more automobiles in the U.S.c. relying completely on Japanese suppliers for its parts.d. pricing its exports in dollars.ANS: B PTS: 117. Wisconsin Inc. conducts business in Zambia. Years ago, Wisconsin established a subsidiary in Zambiathat has consistently generated very large profits denominated in Zambian kwacha. Wisconsin wishes to restructure its operations to reduce economic exposure. Which of the following is not a feasible way of accomplishing this?a. increase Zambian supply orders.b. increase Zambian sales.c. restructure debt to increase debt payments in Zambia.d. reduce Zambian sales.ANS: B PTS: 118. Which of the following firms is not exposed to translation exposure?a. Firm X, with a fully owned subsidiary that periodically remits earnings generated in GreatBritain to the U.S.-based parent.b. Firm Y, with a fully owned subsidiary that periodically generates foreign losses inSweden. The parent covers at least some of these losses.c. Firm Z, with a fully owned subsidiary that generates substantial earnings in Germany. Thesubsidiary never remits earnings but reinvests them in Germany.d. All of the above firms are exposed to translation exposure.ANS: D PTS: 119. ____ represents any impact of exchange rate fluctuations on a firm's future cash flows.a. Translation exposureb. Economic exposurec. Transaction exposured. None of the aboveANS: B PTS: 120. An effective way for an MNC to assess its economic exposure is to review the firm's:a. income statement.b. liquidity.c. retained earnings.d. level of stockholders' equity.ANS: A PTS: 121. If revenues and costs are equally sensitive to exchange rate movements, MNCs may reduce theireconomic exposure by restructuring their operations to shift the sources of costs or revenues to other locations so that:a. cash inflows exceed cash outflows in each foreign currency.b. cash outflows exceed cash inflows in each foreign currency.c. cash inflows match cash outflows in each foreign currency.d. none of the aboveANS: C PTS: 122. Managing economic exposure is generally perceived to be ____ managing transaction exposure.a. more difficult thanb. less difficult thanc. just as difficult asd. none of the aboveANS: A PTS: 123. As opposed to transaction exposure, managing economic exposure involves developing a(n) ____solution.a. short-termb. long-termc. immediated. none of the aboveANS: B PTS: 124. Cierra, Inc. is attempting to assess its degree of economic exposure in euros. In order to do so, it hasapplied regression analysis to determine whether the percentage change in its total cash flow is related to the percentage change in the euro. A ____ and statistically significant slope coefficient resulting from this analysis implies that the cash flows are ____ related to the percentage changes in the euro.a. positive; positivelyb. positive; negativelyc. negative; positivelyd. B and Ce. none of the aboveANS: A PTS: 125. Assume that an MNC's cash flows are positively related to the movements in a foreign currency. If theMNC expects the foreign currency to weaken, it could purchase the currency forward to reduce its degree of economic exposure.a. Trueb. FalseANS: F PTS: 126. An MNC is attempting to reduce its economic exposure by financing a portion of its business withloans in the foreign currency. If the foreign currency weakens, the MNC will need ____ of the foreign currency to cover the loan payment, while the MNC's foreign currency revenues will convert to ____ dollars.a. more; fewerb. more; morec. less; fewerd. less; moreANS: C PTS: 127. An MNC expects to sell fixed assets it utilizes in Europe in the distant future. In order to hedge thesale of these assets in the distant future, the MNC could create a(n) ____ that ____ the expected value of the assets in the future.a. asset; matchesb. asset; exceedsc. liability; matchesd. liability; is less thanANS: C PTS: 128. Long-term forward contracts are a possible way to hedge the distant sale of fixed assets in foreigncountries, but they may not be available for many emerging market currencies.a. Trueb. FalseANS: T PTS: 129. ____ exposure occurs when an MNC translates each subsidiary's financial data to its home currencyfor consolidated financial statements.a. Translationb. Transactionc. Economicd. None of the aboveANS: A PTS: 130. ____ is (are) not a limitation of hedging translation exposure.a. Inaccurate stock price forecastsb. Inadequate forward contracts for some currenciesc. Taxation on gains from forward contractsd. Increased transaction exposureANS: A PTS: 131. To hedge translation exposure, MNCs could ____ that their foreign subsidiaries receive as earnings tocreate a cash outflow in the currency to offset the earnings received in that currency.a. purchase the currency forwardb. sell the currency forwardc. purchase futures contracts of the currencyd. A or Ce. none of the aboveANS: B PTS: 132. Translation losses are ____, while gains on forward contracts used to hedge translation exposure are____.a. tax deductible; not taxedb. not tax deductible; not taxedc. not tax deductible; taxedd. tax deductible; taxedANS: D PTS: 133. In general, it is more difficult to effectively hedge economic or translation exposure than to hedgetransaction exposure.a. Trueb. FalseANS: T PTS: 134. A foreign subsidiary with more susceptible expenses than revenue to exchange rate movements will befavorably affected by an appreciation of the foreign currency.a. Trueb. FalseANS: F PTS: 135. U.S. firms can attempt to hedge their translation exposure of their European subsidiaries with aforward purchase of euros.a. Trueb. FalseANS: F PTS: 136. Hedging translation exposure with forward contracts can backfire if the currency being hedgeddepreciates.a. Trueb. FalseANS: F PTS: 137. A limitation of hedging translation exposure is that translation losses are not tax deductible, whereasgains on forward contracts used to hedge translation exposure are taxed.a. Trueb. FalseANS: T PTS: 138. The translation gain (or loss) is simply a paper gain (or loss). Conversely, the gain (or loss) resultingfrom a hedge strategy is a real gain (or loss).a. Trueb. FalseANS: T PTS: 139. All MNCs are subject to translation exposure.a. Trueb. FalseANS: F PTS: 140. U.S.-based MNCs invoicing in Asian currencies and incurring expenses in Asian currencies wereprobably less affected by the weakness of Asian currencies than U.S.-based MNCs that invoice in Asian currencies but do not incur expenses in those currencies.a. Trueb. FalseANS: T PTS: 141. The management of economic exposure is normally focused completely on transactions that will occurin the next three months.a. Trueb. FalseANS: F PTS: 142. Transaction exposure results when an MNC translates each subsidiary's financial data to its homecurrency for consolidated financial statements.a. Trueb. FalseANS: F PTS: 143. Although forward contracts may reduce translation exposure at the expense of increasing transactionexposure, they are sometimes used to hedge translation exposure.a. Trueb. FalseANS: T PTS: 144. Vermont Co. has foreign expenses denominated in euros that exceed foreign revenues. Appreciation ofthe euro relative to the U.S. dollar will cause this firm's reported earnings (from the consolidatedincome statement) to ____. If a firm desired to protect against this possibility, it could stabilize its reported earnings by ____ euros forward in the foreign exchange market.a. decrease; purchasingb. decrease; sellingc. increase; sellingd. increase; purchasingANS: A PTS: 145. Sarakose Co. is a U.S. company with sales to Canada amounting to C$5 million. Its cost of materialsattributable to the purchase of Canadian goods is C$7 million. Its interest expense on Canadian loans is C$5 million. The dollar value of Sarakose's "earnings before interest and taxes" would ____ if the Canadian dollar appreciates; the dollar value of its cash flows would ____ if the Canadian dollarappreciates.a. increase; increaseb. decrease; increasec. decrease; decreased. increase; decreasee. increase; be unaffectedANS: C PTS: 146. If a U.S. firm has much more revenue than expenses denominated in euros, the firm will likely ____ ifthe euro ____.a. benefit; weakensb. be unaffected; weakensc. be unaffected; strengthensd. benefit; strengthensANS: D PTS: 147. Assume that Atlanta Co. is producing motorcycles and selling them to U.S. customers. Atlanta Co.obtains all of its supplies from American firms and has no competition in the U.S. It has one major competitor in Japan. Now assume that Phoenix Co. is producing office furniture and obtains itssupplies from a Canadian firm. Based on this information, Atlanta Co. has ____ exposure and Phoenix Co. has ____ exposure.a. transaction; translationb. translation; transactionc. economic; transactiond. economic; translationANS: C PTS: 148. Orlando Co. produces home appliances and sells them in the U.S. It outsources the production of theappliances to a Chinese manufacturer, and the imported appliances are priced in dollars. Its major competitor for appliances is located in Mexico. Based on this information, Orlando Co. is subject to ____ exposure.a. economicb. transactionc. translationd. economic and transactionANS: A PTS: 149. Tennessee Co. conducts business in the U.S. and Canada. The net cash flows from Canadianoperations are expected to be C$500,000 next year. The Canadian dollar is valued at about $.90. The net cash flows from U.S. operations are supposed to be $200,000. To reduce sensitivity of its net cash flows without reducing its volume of business in Canada, Tennessee Co. could:a. purchase Canadian supplies.b. increase its borrowings in U.S.c. decrease prices on Canadian goods.d. decrease its borrowed funds in Canada.ANS: A PTS: 150. Mercury Co. has a subsidiary based in Italy and is exposed to translation exposure. Mercury forecaststhat its earnings next year will be €10 million. Mercury decides to hedge the expected earni ngs by selling €10 million forward. During the next year, the euro appreciated. Mercury's consolidatedearnings were ____ affected by the euro's movement, and Mercury's hedge position was ____ affected by the euro's movement.a. favorably; favorablyb. favorably; adverselyc. adversely; favorablyd. adversely; adverselyANS: B PTS: 151. All MNCs are subject to transaction exposure.a. Trueb. FalseANS: F PTS: 152. A foreign subsidiary with more revenue than expenses denominated in a foreign currency will befavorably affected by appreciation of the foreign currency.a. Trueb. FalseANS: T PTS: 153. Economic exposure represents any impact of exchange rate fluctuations on a firm's future cash flowsand thus includes transaction exposure.a. Trueb. FalseANS: T PTS: 154. In general, it is more difficult to effectively hedge economic or translation exposure than to hedgetransaction exposure.a. Trueb. FalseANS: T PTS: 155. To reduce economic exposure when a foreign currency has a greater impact on cash inflows, an MNCcould reduce its level of foreign sales, increase its foreign supply orders, or restructure debt to increase debt payments in the foreign currency.a. Trueb. FalseANS: T PTS: 156. When a foreign currency has a greater impact on cash outflows than on cash inflows, one possibility inrestructuring operations is to reduce foreign sales.a. Trueb. FalseANS: F PTS: 157. Even if translation exposure does not affect cash flows, it is a concern of many MNCs.a. Trueb. FalseANS: T PTS: 158. Translation exposure results when an MNC translates each subsidiary's financial data to its homecurrency for consolidated financial statements.a. Trueb. FalseANS: T PTS: 159. Implementing a forward or money market hedge to hedge translation exposure may increasetransaction exposure.a. Trueb. FalseANS: T PTS: 160. Which of the following statements is incorrect?a. Transaction exposure represents only the exchange rate risk when converting net foreigncash inflows to U.S. dollars or when purchasing foreign currencies to send payments.b. Economic exposure represents any impact of exchange rate fluctuations on a firm's futurecash flows.c. Firms can simply focus on hedging their foreign currency payables and/or receivables tohedge economic exposure.d. The management of economic exposure tends to serve as a long-term solution rather thanjust a short-term solution.ANS: C PTS: 161. Thornton Corporation has extensive liabilities denominated in Cyprus pounds resulting from importsfrom Cyprus. However, Thornton's revenues are denominated solely in U.S. dollars. Which of the following is probably not true?a. Thornton would benefit from a depreciation of the Cyprus pound.b. Thornton has at least some transaction exposure.c. Thornton has at least some economic exposure.d. Thornton has at least some translation exposure.e. All of the above are true.ANS: D PTS: 162. A U.S.-based MNC has a subsidiary in Barbados that generates substantial net cash inflowsdenominated in Barbados dollars. Given this information, the MNC would ____ from a(n) ____ of the Barbados dollar.a. benefit; appreciationb. benefit; depreciationc. not benefit; appreciationd. none of the aboveANS: A PTS: 163. Campbell Company has a subsidiary located in Jamaica. The subsidiary has generated losses for thelast five years and is expected to generate losses for the next ten years. Campbell is reluctant to divest of this subsidiary, however. Given this information, Campbell would ____ from a(n) ____ of the Jamaican dollar.a. benefit; appreciationb. benefit; depreciationc. not benefit; appreciationd. not benefit; depreciatione. B and CANS: E PTS: 164. ____ is (are) a limitation of hedging translation exposure.a. Inaccurate earnings forecastsb. Inadequate forward contracts for some currenciesc. Accounting distortionsd. Increased transaction exposuree. All of the aboveANS: E PTS: 1。

高顿C A a c c a .g a u n .c nProfessional Level – Essentials Module, Paper P3Business AnalysisDecember 2013 Answers 1(a)Internal growth , sometimes called organic growth, takes place when the company grows by building on and developing itsown existing competencies. This is how MachineShop has grown to date. The frequent opening of new stores represents its organic growth. The company appears to be comfortable and successful in this approach.As well as being familiar with this approach, internal growth has a number of other advantages for MachineShop.First, MachineShop is the only company which really understands the market that it has positioned itself in. Consequently,there are no equivalent companies or competitors to target for acquisition and so there is no clear alternative to organic growth.This market knowledge is a core competence, creating and reinforcing competitive advantage.Second, although the final cost of developing through organic growth may be greater than through acquisition, the spread of cost may be easier to bear. Acquisitions usually require a major expenditure at a certain point in time. A slower rate of change,associated with more gradual expenditure and sustainable growth, may also minimise disruption to other activities within the company. Acquisition can be a significant distraction and it could easily prevent the directors from continuing their successful expansion of the MachineShop stores.In some circumstances, internal growth may be the only realistic option available to an organisation. This may be the case at MachineShop. It acknowledges that it is having difficulty in identifying companies to acquire or with which to pursue a strategic alliance. FRG, analysed in depth in the second part of this question, is the best fit that MachineShop can find, yet it is a business which primarily deals with trade customers and larger machines and it has no experience of selling to domestic consumers.Internal development avoids the political and cultural problems arising from post-acquisition integration and coping with the different traditions and expectations of the acquired company. MachineShop has already experienced such problems with LogT rans and EngSup.However, international expansion is often very difficult to achieve with internal growth. This can be due to government restrictions. For example, the government of Ceeland required, until recently, that firms trading in Ceeland were registered in that country and had at least one Ceelander director. Cultural differences also inhibit organic growth. The company will have little understanding of how business is done in the country, the expectations of stakeholders or the way that business transactions are agreed and executed.An acquisition takes place when ownership is taken of another organisation. A compelling reason to develop by acquisition is the speed of entry it apparently provides into a new product or geographical market. This speed of entry is often associated with scale. MachineShop is considering the purchase of a company which already has revenues of $9m. It would take a long time to build a company of that size. One of the concerns of Dave Deen is that the MachineShop concept will be adopted by emerging competitors in countries where it does not have a presence. A prime motive for considering the acquisition of FRG is that it has a depot network, distribution and sales team already in place. FRG is also familiar with the organisational and social culture of Ceeland. It is aware of its laws and corporate responsibilities, tax and legislative regimes. If MachineShop tried to grow organically in Ceeland, it would be starting from scratch in a country where it had no experience of trading.The acquisition may provide an opportunity for MachineShop to exploit its core competencies in a new market, as well as satisfying Dave Deen’s desire for continuing growth and high profile business activity.Rapid growth through acquisition may also offer immediate economies of scale. This is one of the attractions to Dave Deen.As the company grows larger, it should be able to reduce product costs, allowing it to raise the barriers to market entry,reducing the attraction of the market to potential competitors. Growth through acquisition is a quick way of delivering the scale and cost efficiency of operations required to deter potential competitors from entering the market that it understands and dominates.Finally, acquisition may provide an opportunity for an organisation to address a lack of resources or competencies in certain areas. This is what prompted MachineShop’s two acquisitions in 2010. LogT rans was bought to provide the company with internal logistics capacity and EngSup was purchased to assist in post-sales support.Strategic alliances take place when two or more organisations share resources and activities to pursue a given strategy. Both companies seek to gain benefits through co-operation. In the context of MachineShop and FRG, the prime motive would be what Johnson, Scholes and Whittington term as ‘co-specialisation’. An alliance would be used to enter a new geographical market where an organisation needs local knowledge and expertise. One of the features of strategic alliances is the range of alliances that might be pursued. Some alliances are very formal, others involve informal networking between organisations with no shareholding or common ownership involved.A joint venture is an arrangement where a newly created organisation is jointly owned by the parents. In this instance, a new company could be created in Ceeland with the local company providing labour, local expertise and countrywide knowledge.MachineShop would provide the products, marketing expertise and finance. At the other end of the spectrum, MachineShop could consider a looser network arrangement where FRG would provide space in their stores for a MachineShop franchise to operate. In this way, MachineShop would gain depot space which they could use to build their own market. This would be an ideal way of prototyping the MachineShop concept in Ceeland to see if the market really does exist and that parallels with Arboria are not unrealistic. In return, FRG would receive a franchise fee which would help it improve its financial position, as well as it potentially benefiting from cross-purchases by customers attracted to the store by the MachineShop facility. Such a loose arrangement could be put in place very quickly, compared to any formal joint venture, acquisition or organic expansion. 高顿财经A C C A a c c a .g a o d u n .c nOne of the main problems of strategic alliances is the ability of the initiator to find an appropriate partner. It is not known if the company which is currently being targeted (FRG) would be interested in a strategic alliance. Hence a search for a partner would have to take place, which could prove difficult and time-consuming. There may also be a concern, at MachineShop,that once the partner understands the dynamics of the market, they will steal the idea and promote it as their own. Networking also offers a relatively modest and low profile approach to expansion and this may not give Dave Deen and his fellow directors the visible growth they seek. It may be too conservative and not exciting enough.SummaryA case could be made for adopting any of these three distinct approaches and this is recognised by MachineShop itself. This is probably why it believes that growth will be achieved through a combination of organic growth, acquisition and strategic alliance. The latter two are really quite problematic given MachineShop’s internal competencies and the market that it is in.In the context of risk, a loose strategic alliance with a foreign agent seems an attractive route. However, the company would have to find a suitable partner and the approach may not deliver the visible growth required by the directors. An acquisition is risky, particularly in countries where MachineShop has no experience of trading. Furthermore, MachineShop’s limited experience of acquisition to date has not been particularly successful, despite both acquired companies being based in Arboria. Organic growth offers the advantages of being proven and familiar. However, it may be difficult to achieve the rapid growth demanded, and is particularly risky to pursue in countries where the company has little understanding of trading arrangements, organisational and social culture and stakeholder expectations.(b)Report From: Business analyst To: The Board of MachineShop Introduction This brief report looks at the potential acquisition of FRG by MachineShop. It uses the criteria of suitability, acceptability and feasibility, which is a standard framework for evaluating potential acquisitions. It concludes with my recommendation.Suitability Suitability is concerned with whether a strategy addresses the circumstances in which an organisation is operating, the strategic position. In the context of MachineShop, does an acquisition make sense and, in the narrower context, does the acquisition of FRG make sense? Johnson, Scholes and Whittington, noted authors on business strategy, have suggested that an acquisition makes particular sense if speed to market is vital. This appears to be the case at MachineShop, where the board wants the company to grow quickly whilst there are no direct competitors. In terms of capabilities, the delivery of economies of scale is also important and this has already been identified as a key benefit of the acquisition, further raising a barrier to entry to potential competitors. Finally, in terms of growth, acquisition appears to largely avoid the cultural problems that are bound to arise by trying to organically grow a company in a foreign land. Expansion in Ceeland is seen as an opportunity for rapid growth, exploiting important strengths , in particular the internal competencies of MachineShop.Acquisition, particularly in Ceeland, appears to offer the rapid growth which the company seeks.Acceptability Acceptability is concerned with the expected outcomes of a strategy. These can be seen in context of stakeholder reactions,risk and return. In the context of MachineShop, the primary stakeholders, the board, are likely to be excited by a foreign acquisition. It provides you with the high profile and the business excitement that you enjoy. However, in financial performance, the potential purchase of FRG looks less attractive. Any financial ratios calculated for FRG cannot really be compared with MachineShop, because the nature of the customers is quite different, with 65% of MachineShop’s sales being made to domestic consumers, and so is the country and culture that the two companies operate in. However, whilst acknowledging this limitation, an analysis of the latest financial figures (T able 1) does not appear to paint a particularly attractive picture. FRG has gross profit and operating margins well below that of MachineShop. FRG also has a relatively low Return on Capital Employed (ROCE) of 6·45%, compared to 17·5% for MachineShop. The gearing ratio is higher (20·16%)and the interest cover is lower (2·67) than MachineShop.Table 1: Comparison of MachineShop and FRGCalculation (1)MachineShop FRG Gross profit marginGross profit/revenue 28·00%16·67%Operating marginOperating profit/revenue 17·00%8·89%ROCEOperating profit/capital employed 17·50%6·45%Gearing ratioLong-term loans/capital employed 15·00%20·16%Interest cover ratio Operating profit/finance charges 3·52·67(1)Other acceptable definitions will be credited Improving the financial performance of FRG might be seen as an opportunity for MachineShop, except that the post-acquisition performance has actually worsened at the two companies it acquired in Arboria and these were also marred by management and labour disputes. At present, improving the financial performance of acquired companies does not appear to be a core competence of MachineShop. MachineShop also has no experience of acquiring a foreign company and the scale of the acquisition is much greater than its two acquisitions to date. FRG has a turnover of $9,000,000, almost nine times the combined revenue of the two Arborian companies which MachineShop acquired in 2010.高顿财经A C C A a c c a .g a o d u n .c nFeasibilityFeasibility is concerned with whether an organisation has the resources and competencies to deliver a strategy. Financial resources are in place to fund an acquisition through a combination of loans and retained profit. However, no negotiations have yet been opened with FRG. As a result, no comment on the financial feasibility of the acquisition can yet be made.However, the difficulty of satisfactorily valuing a private company suggests that many months of negotiation might lie ahead,particularly given the number and composition of the shareholders of FRG. T rade unions may require certain post-acquisition guarantees about labour retention and reward. Such protracted negotiations would partly nullify, at least, the speed of growth that acquisition appears to offer.Overall, acquisitions have a poor record in delivering business success. There are usually problems of integration and cultural fit. MachineShop has experienced this to some extent with both LogT rans and EngSup. At LogT rans, the directors had to be removed post-merger because of personality clashes. At EngSup, there was a problem in instilling in service engineers the need for appropriate customer service.The post-financial performance of the two acquired companies has also been disappointing. Since acquiring LogT rans, gross profit, operating margin and ROCE have fallen and the company is more highly geared than it was before the merger with a reduced interest cover ratio. The same is true at EngSup. T able 2 summarises the data. MachineShop has to review its competencies in acquisitions, not just its competencies in its market. It must also recognise that both these acquisitions took place in Arboria, a country where it understands the culture, laws and regulations. It might be reasonable to expect that the acquisition of a foreign company would be even less successful.Table 2: Performance analysis, LogTrans and EngSup (2009–2012)LogTrans –2012LogTrans –2009EngSup –2012EngSup – 2009Gross profit margin 17·86%21·54%21·43%23·08%Operating margin 9·29%10·77%11·43%13·85%ROCE 9·56%13·46%12·50%15·52%Gearing ratio 14·71%9·62%9·38%6·90%Interest cover ratio 2·174·674·005·63It also has to be recognised that FRG is not a complete match to MachineShop. FRG is experienced in the business market,but has no experience of selling to domestic customers, a service that accounts for 65% of MachineShop’s sales. Conclusion In theory, an acquisition would appear to be a suitable growth strategy given MachineShop’s strategic position and objectives.However, whether the acquisition of FRG is appropriate is more doubtful. FRG does not appear to be financially performing particularly well and it has no experience of selling to domestic customers. Furthermore, MachineShop has no experience of acquiring a company outside Arboria or, indeed, a company as large as this one. Its two previous acquisitions were within Arboria and were relatively modest in size. Both acquired companies should have represented relatively good ‘fits’ within the supply chain of MachineShop. However, performance post-acquisition has been disappointing, with both companies reporting drops in profitability. MachineShop would have to improve their competencies in managing acquisitions. Overall, the proposed purchase of FRG appears to be very risky and MachineShop might be better looking elsewhere for a more suitable acquisition. It might also consider entering into a dialogue with FRG about a strategic alliance of some sort (perhaps followed by acquisition), which might offer an attractive alternative to immediate purchase of the company.(c)Michael Porter developed his diamond to explore the determinants of national competitive advantage. Its primary use is at a national and regional level as a framework for exploring the competitiveness of a nation (or region) and as a framework for determining policy initiatives. However, it might also be used in this context to analyse, in a more structured way, the competitive nature of Ceeland, the country which MachineShop is keen to expand into, and also to understand factors that might have contributed to MachineShop’s success in Arboria. The diamond has four principal determinants. The first of these is factor conditions which are the inputs necessary to compete in any industry, such as labour, land, natural resources, capital and infrastructure. The case study scenario suggests that the transportation system in Ceeland is cheap andeffective and ease of distribution is one of the factors which attracted MachineShop to the country. Furthermore, the country has a well-established digital communications structure, and as MachineShop expects to make extensive use of internet order placement, this is also important. Both of these are examples of advanced factors which offer more sustainable advantages than basic factors, such as natural resources and unskilled labour and they would make Ceeland attractive to MachineShop.However, both these factors are also generalised factors which do not provide as decisive and sustainable a basis for competitive advantage as other more specialised factors .The second facet is the demand conditions , the nature of home demand for an industry’s product or service. This appears particularly significant in the context of MachineShop. Porter argues that the home market usually has a disproportionate impact on a firm’s ability to perceive and interpret buyer needs. One of the reasons for this is the attention the home market requires. Product development usually takes place in the home market. Pride and ego focus attention on succeeding in this market. Pressure from buyers is immediate and the proximity and cultural similarity of these buyers mean that their needs are well understood.MachineShop has reaped the benefits of supplying a vigorous, growing and demanding home market in Arboria which, it believes, may allow it to anticipate buyer needs in other countries. Dave Deen believes that macroeconomic factors suggest高顿财经A C C A a c c a .g a o d u n .c nthat Ceeland is quickly beginning to resemble Arboria. MachineShop has to hope that his perception is correct and that consumers’ needs are not just idiosyncratic to Arboria. Further research needs to be undertaken to ensure that Ceeland’s cultural and social values will really lead to the changes in consumer behaviour that the economic trends are suggesting. If they do, then MachineShop will have definitely benefited from demands placed on it from the sophisticated and demanding buyers in Arboria.The third element of the diamond is related and supporting industries . This concerns the presence in the nation of supplier industries or related industries which are internationally competitive. There is some evidence of this in the scenario (MachineShop already buy from a Ceeland supplier), although the government (see later) is encouraging the production of light engineering and so related, supporting industries may eventually develop in Ceeland.The fourth element concerns firm strategy, structure and rivalry . Porter suggests that there is a strong association between vigorous domestic rivalry and the creation and persistence of competitive advantage in an industry. This has not really been a major factor in the success of MachineShop because it has no obvious rivals in the market in Arboria, particularly for domestic customers. A similar situation is likely to occur in Ceeland and so vigorous domestic rivalry will be lacking.Porter also considers the nature of chance and the role of the government. The role of government is particularly significant in this scenario and it influences elements of the diamond. For example, it has:–Invested heavily in transportation systems and information technology (factor conditions),–Lifted regulations on what type of machine can be used by an unqualified operator (demand conditions),–Removed the requirement for all companies trading in Ceeland to be registered in that country and to have at least one Ceelander director (firm strategy, structure and rivalry),–Encouraged the production of light engineering (related and supporting industries).So, although Porter’s diamond is probably more relevant to understanding industries and countries, it does provide a framework for understanding the national competitive structure that individual firms compete within. Ceeland appears to be relatively attractive from the perspective of factor and demand conditions. However, the stimulus experienced by a company operating in a country where there are internationally competitive suppliers or related industries, or where there is a great degree of rivalry between competitors, will be missing. 2(a)ATD has been reliant on intuitive estimating, with the sales manager predicting sales from his experience. The company is now evaluating more formal techniques of estimating and a business analyst has produced initial spreadsheets using linear regression and time series analysis. The business analyst has now left the company, leaving his work unexplained.Figure 1 is a least square analysis of the sales data, defining the equation of a straight line that ‘best’ fits the data by minimising the squares of deviations of actual values from the mean. In least squares analysis, one set of data is defined as the independent variable (x –in this case, time) and the other set of data, sales, is defined as y – the dependent variable.From the data presented in Figure 1 the line of best fit is:y = 125·022 + 1·84x This equation can be used to predict a value for the next quarter (2013 quarter 3):y = 125·022 + 1·84(15)y = 152·62The positive value of b suggests that the overall sales trend is upwards.The correlation coefficient ‘r’ shows the strength of the statistical relationship between the two variables. In Figure 1 the value of r is 0·253, which suggests that the two variables are weakly connected. The coefficient of determination (r 2) shows that 6·4% of the variation in sales (y) is due to the passage of time (x). Low coefficients of correlation (and determination) are usual when data is widely scattered around the mean and/or are related in a non-linear fashion. Both these factors might be applicable here, particularly due to the pattern caused by large seasonal variations. At ATD, linear regression appears to be of little practical use. The predicted value for 2013 quarter 3 appears too low (it islower than all actual quarter 3 figures to date and much lower than the previous quarter 3 figure of 169). The technique might be more useful if the annual data was plotted (hence eliminating the seasonal variation) or to identify alternative variables which better explained the seasonal variation and to calculate a correlation coefficient between these and the sales data.Time series analysis uses a moving average to define a trend. In Figure 2, the moving average has been calculated on a quarterly basis, which seems appropriate as this is how the data has been presented. The trend line is calculated from the average of the first two quarters (for example, quarters 1–4 and quarters 2–5) to allow the trend to be centralised against an actual sales value. The difference between the actual values and the trend line is also averaged to produce a seasonal variation. Any difference left between the actual sales value and the seasonally adjusted trend is defined as a residual variation. Figure 2 also shows the seasonally adjusted trend values.Forecasting future values is achieved by extrapolating the trend line and then adding or subtracting the seasonal variation.There is no agreed way of extrapolating the trend. A scatter graph could be drawn and a trend line drawn by hand.Alternatively, a least square regression of the trend values could be performed to define a line of best fit. Using a ‘best guess’approach, a trend value of 149 might be hypothesised for quarter 1 of 2013, giving a predicted value of 134·3 (149 – 14·7),高顿财经A C C A a c c a .g a o d u n .c njust below the actual recorded value of 137. Predicted values would also be calculated for subsequent quarters. For example,based on a (hand drawn) trend value of 151, the predicted value for quarter 3 of 2013 would be 173·55 (151 + 22·55),which subjectively seems much more realistic than the 152·55 suggested by the least squares analysis.The moving average method also explicitly defines the significant seasonal variations for this product and so reflects these in the predicted values, meaning that production capacity, inventory levels and resource purchase requirements are sensitive to the fluctuating demand. The high residual variation in 2012 quarter 4 probably needs some investigation. It is possible that demand is falling faster than might be expected and this will have important consequences for estimated sales figures.One of the problems of both techniques is that forecasts are based on past data. Sudden changes in the market will not be immediately reflected in the forecasts. Thus there may still be a role for the sales manager to use his experience, intuition and judgement to amend the forecasts produced by the statistical analysis.Finally, of the two approaches presented here, time series analysis seems the most appropriate technique for sales forecasting at ATD.(b) A budget is essentially a short-term business plan. It is usually expressed in financial terms and it serves as a mechanism forconverting the long-term plan and objectives of the company into an actionable blueprint for the near future, usually the next year. Most businesses have sales ambitions and it is the achievement of these that drive many budgets. At ATD, like in many organisations, the ability to sell sufficient products is the main problem. Setting and achieving sales targets, both in terms of volume and price, is a preoccupation, and in most organisations it is the limiting factor that the budgetary system is based around. In such circumstances, the sales budget is the first budget to be prepared as it determines the overall business activity for the forthcoming period. It is the level of sales that determines inventory requirements, production capacity, raw material purchases, etc. At ATD, the sales forecast not only determines the level of activity but also the pattern of that activity, with seasonal variations that will have to be taken into account in other activities. Such seasonal variations might reveal other limiting factors, such as production capacity or inventory storage space and these would have to be investigated and policies determined.Budgets should allow proper, realistic targets to be set not only for sales but also for functions where there is clear accountability (such as production management and inventory management). T argets need to be rigorous and achievable.They also need to be connected to clear organisational demarcation where targets are under the control of a manager who has responsibility for that target. Thus budgeting should improve forecasting through requiring a rigorous and collectively responsible process. Flexing the budget would allow the performance of parts of the organisation to be assessed in the context of missed sales targets. For example, an analysis might reveal that the production manager has reduced target raw material costs even though lower sales volumes mean that overall revenue targets have not been met. At present, the production manager is frustrated because he feels that he is working ‘tirelessly to keep costs down, but my only reward is that I cannot replace one of my best purchasing administrators who left last month’. However, we only have his assertion about his ability to keep costs down. With a flexed budget, the business can actually see if he has effectively controlled costs. Flexed budgets and their associated variances provide an important insight into how different functions or departments (and their managers)are actually performing.There is also significant evidence to suggest that departmental managers will be motivated if they are required to strive to achieve targets that they themselves have helped set, fostering a sense of ownership and commitment. This would help address the managers’ feelings of powerlessness and the sense that they are undervalued. Their morale should improve as they see their experience and opinions valued. Benefits should also accrue for the organisation as a whole. As knowledge from different departments is pooled, understanding, target setting and co-ordination should be improved due to the number of different departments involved in budget setting.Because budgets include planning, feedback and control elements, they offer important insights into how an organisation should react to failed sales targets. The response of the CEO has been to take general measures which appear, on the face of it, to offer immediate savings, but have an unpredictable effect. Such indiscriminate measures as a ban on business travel,cancelled marketing initiatives and a complete freeze on recruitment may be legitimate responses, but without a budget, it is not really possible to assess their effectiveness. A proper variance analysis might suggest better reactions, and indeed if reduced sales targets are compensated for in some way by reduced raw material and labour costs, then the overall performance might not warrant, in the short term, such an extreme response. The organisation needs to respond to variances and exercise proper controls, revising plans (and budgets) if necessary. The suggested measures may be counter-productive.For example, banning business travel might prevent the production manager from travelling to a supplier where he would be able to negotiate reduced material costs. Cancelled marketing initiatives might further affect the capability of the organisation to meet sales targets and a complete freeze of recruitment may affect the organisation’s effectiveness and its capacity to deliver products on time and to the required quality.Thus a formal budgeting process would allow ATD to address three particular areas of concern. The ability of the organisation to make realistic forecasts, the poor morale of departmental managers and the appropriateness of the organisation’s response to its failure to hit predicted sales targets. 高顿财经A C C A a c c a .g a o d u n .c n。

会计商务英语试题及答案一、单项选择题（每题2分，共20分）1. Which of the following is not a function of accounting?A. Record-keepingB. Decision-makingC. Financial reportingD. Market research2. The process of identifying, measuring, and communicating economic information is known as:A. AuditingB. BudgetingC. AccountingD. Taxation3. What is the term used to describe the systematic and periodic recording of all business transactions?A. BookkeepingB. AccountingC. ReportingD. Analysis4. Which of the following is not a component of the financial statements?A. Balance sheetB. Income statementC. Cash flow statementD. Marketing plan5. The principle that requires companies to match revenues and expenses in the same accounting period is known as:A. Accrual basis accountingB. Cash basis accountingC. Matching principleD. Revenue recognition principle6. What is the term for the difference between assets and liabilities on a company's balance sheet?A. EquityB. ProfitC. LossD. Capital7. The process of adjusting account balances to ensure they are accurate at the end of an accounting period is called:A. Closing the booksB. Adjusting entriesC. AuditingD. Budgeting8. Which of the following is not a type of intangible asset?A. TrademarksB. PatentsC. GoodwillD. Inventory9. The statement that shows the results of a company's operations over a period of time is:A. Balance sheetC. Cash flow statementD. Statement of changes in equity10. The process of verifying the accuracy of financialrecords is known as:A. AccountingB. AuditingC. BookkeepingD. Taxation二、多项选择题（每题3分，共15分）1. Which of the following are considered current assets?A. CashB. Accounts receivableC. LandD. Inventory2. The main components of a company's liabilities include:A. Accounts payableB. Long-term debtC. EquityD. Deferred revenue3. The following are examples of accounting principles except:A. Going concernB. ConsistencyC. MaterialityD. Market research4. Which of the following are considered as expenses in theA. Cost of goods soldB. Salaries and wagesC. Dividends paidD. Depreciation5. The main purposes of financial reporting include:A. Assisting in decision-makingB. Compliance with regulationsC. Enhancing company imageD. Facilitating communication with stakeholders三、填空题（每题2分，共20分）1. The accounting equation is expressed as: Assets = Liabilities + ________.2. The term used to describe the increase in the value of an asset or a decrease in the value of a liability is ________.3. The process of preparing financial statements at the end of an accounting period is known as ________.4. The statement that shows the changes in cash and cash equivalents during a period is called the ________.5. The principle that requires companies to provide information that is clear and understandable to users is known as the ________ principle.6. The term used to describe the decrease in the value of an asset due to use, wear and tear, or obsolescence is ________.7. The process of determining the cost of goods sold is based on the ________ of inventory.8. The term used to describe the allocation of costs over the useful life of an asset is ________.9. The process of adjusting the accounts to reflect theactual financial position of a company is called ________.10. The term used to describe the difference between the purchase price and the fair value of an asset is ________.四、简答题（每题10分，共40分）1. Explain the difference between the accrual basis and cash basis of accounting.2. Describe the role of the balance sheet in financial reporting.3. What are the main objectives of an audit?4. Discuss the importance of internal controls in accounting and finance.五、案例分析题（共15分）A company has the following transactions during the month of January:- Received cash from customers for goods sold: $10,000- Paid suppliers for inventory purchased: $6,000- Paid salaries to employees: $3,000- Received a loan from a bank: $5,000- Paid rent for the office: $2,000Based on the above transactions, prepare a simple income statement and balance sheet for the month of January.答案：一、单项选择题1. D2. C3. A4. D 5。