SECTION ONE (Compulsory)：Answer all ten questions in this section. Each question carries 1 mark.
　　1. Multiple-choice questions: from the following four options, select a correct and fill in its labeling the brackets. (A total of 10 points)
　　1. Suppose the demand for tea is very price-elastic. To increase revenue, the tea supplier should ___ the price level.
　　A. Increase
　　B. Decrease
　　C. Not change
　　D. Uncertain
　　2. Which of the following would NOT cause a shift upward of the consumption schedule? ()
　　A. An increase in household wealth.
　　B. An expectation of rising incomes in the future.
　　C. A reduction in income taxes.
　　D. An increase in household disposable income.
　　3. An increase of $1,000 in bank deposits will: ()
　　A. Result in a higher level of inflation.
　　B. Mean proportionately increased bank profits.
　　C. Facilitate the credit creation process.
　　D. Bring about government intervention in the working of the banking system.
　　4. A rising foreign exchange rate for country X will: ()
　　A. Result in a rise in X’s RPI.
　　B. Be likely to raise the employment level in X.
　　C. Favor those holidaying in X from abroad.
　　D. Ease inflationary pressures with X.
　　5. Cutting taxes can lower investment through its impact on interest rates. This is an example of the: ()
　　A. Income effect.
　　B. Accelerator effect.
　　C. Crowding out effect.
　　D. Multiplier effect.
　　6. Which one of the following is the most widely used measure of inflation? ()
　　A. The Consumer Price Index.
　　B. The Index of Leading Economic Indicators.
　　C. The prime rate.
　　D. The Federal Funds rate.
　　7. You have just won the lottery (congratulations!) and are given the option of receiving $2,000,000 now or an annuity of 200,000 at the end of each year for thirty years. Which of the following is correct? () (assume you are making the decision based on present values)
　　A. You cannot choose between the two without first computing future values.
　　B. You will always choose the lump sum regardless of interest rates.
　　C. Comparing the future value of each will lead to the same decision as comparing present values.
　　D. You will always choose the annuity.
　　E. You will choose the lump sum if interest rates are 7%.
　　8. A company buys 10 items at a price of £200 each, all on 14 days free credit. It then sells on the next day 5 units for £350 each. One item was sold for cash, the remainder on 21 days free credit. What effect do these transactions have on the firm’s cash flow on the day of the sale? ()
　　A. Gains £750
　　B. Gains £1,750
　　C. Loses £2,000
　　D. Gains £350.
　　9. A firm has fixed costs of £100,000 per month and variable costs of £25 for item. It sells them for £50 each. If it sells 5,000 units each month, what is the firm’s Margin of Safety? ()
　　A. 1,000 units per month
　　B. £50,000
　　C. 1,000 units
　　D. 25%.
　　10. Fred Perry, CFA, purchased $100,000 of a newly issued Treasury inflation protection security based on the following characteristics and information.

　　The coupon payment at the end of one year is closest to: ()
　　A. $2,000.
　　B. $2,100.
　　C. $5,000.
　　D. $7,000.

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