Question 1

LOS.qual.int.mgmt.0020.wml
COST-0028B
LOS: LOS.qual.int.mgmt.0020.wml
Lesson Reference: Quality Management
Difficulty: medium

In Belk Co.'s just-in-time production system, costs per setup were reduced from $28 to $2. In the process of reducing inventory levels, Belk found that there
were fixed facility and administrative costs that previously had not been included in the carrying cost calculation. The result was an increase from $8 to $32
per unit per year. What were the effects of these changes on Belk's economic lot size and relevant costs?

(This question is CIA adapted)

Lot size Relevant costs

Decrease Increase
Increase Decrease
Increase Increase
Decrease Decrease

Rationale
 Decrease Increase
The purpose of the just-in-time (JIT) production system is to decrease the size of production runs (and therefore inventory levels) by decreasing setup
costs. Lot sizes would decrease as the number of lots processed during the year increases. Since inventory levels would decrease with JIT, relevant
costs would also drop (i.e., capital invested in inventory could be invested in other assets—a cost savings). The fixed facility and administrative costs are
irrelevant as fixed costs would remain the same regardless of changes for JIT. The unit costs will increase because fixed costs will be spread over fewer
inventory units produced from JIT's eliminating effect on excess inventory production.

Rationale
 Increase Decrease
The purpose of the just-in-time (JIT) production system is to decrease the size of production runs (and therefore inventory levels) by decreasing setup
costs. Lot sizes would decrease as the number of lots processed during the year increases. Since inventory levels would decrease with JIT, relevant
costs would also drop (i.e., capital invested in inventory could be invested in other assets—a cost savings). The fixed facility and administrative costs are
irrelevant as fixed costs would remain the same regardless of changes for JIT. The unit costs will increase because fixed costs will be spread over fewer
inventory units produced from JIT's eliminating effect on excess inventory production.

Rationale
 Increase Increase
The purpose of the just-in-time (JIT) production system is to decrease the size of production runs (and therefore inventory levels) by decreasing setup
costs. Lot sizes would decrease as the number of lots processed during the year increases. Since inventory levels would decrease with JIT, relevant
costs would also drop (i.e., capital invested in inventory could be invested in other assets—a cost savings). The fixed facility and administrative costs are
irrelevant as fixed costs would remain the same regardless of changes for JIT. The unit costs will increase because fixed costs will be spread over fewer
inventory units produced from JIT's eliminating effect on excess inventory production.

Rationale
 Decrease Decrease
The purpose of the just-in-time (JIT) production system is to decrease the size of production runs (and therefore inventory levels) by decreasing setup
costs. Lot sizes would decrease as the number of lots processed during the year increases. Since inventory levels would decrease with JIT, relevant
costs would also drop (i.e., capital invested in inventory could be invested in other assets—a cost savings). The fixed facility and administrative costs are
irrelevant as fixed costs would remain the same regardless of changes for JIT. The unit costs will increase because fixed costs will be spread over fewer
inventory units produced from JIT's eliminating effect on excess inventory production.
Question 2
LOS.erm.cloud.computing.0020.wml
aicpa.aq.erm.cloud.computing.007_17
LOS: LOS.erm.cloud.computing.0020.wml
Lesson Reference: ERM for Cloud Computing
Difficulty: medium
Bloom Code: 3
A company permits employees to work from home using company-owned laptops. Which of the following competitive advantages does the company most
likely obtain as a result of this decision?
Integrity
Reliability
Engagement
Confidentiality

Rationale
 Integrity
Incorrect. Allowing employees to work from home is unlikely to influence integrity.

Rationale
 Reliability
Incorrect. Allowing employees to work from home could potentially lower, not raise, reliability since employees may be more distracted at home than
at work.

Rationale
 Engagement
Correct! Employees are likely to be more engaged and committed to the organization when working from home than when working at the office. In
addition, allowing employees to work from home increases the availability of the company's systems to employees.

Rationale
 Confidentiality
Incorrect. Allowing employees to work from home could potentially lower, not raise, confidentiality since employees may use less secure connections
or have interruptions that lessen their awareness of confidentiality.
Question 3
LOS.coso.17prcpls.0030.wml
aq.coso.17prcpls.001
LOS: LOS.coso.17prcpls.0030.wml
Lesson Reference: 17 Principles of Internal Control
Difficulty: easy
Management of Johnson Company is considering implementing technology to improve the monitoring of internal control. Which of the following best
describes how technology may be effective at improving internal control monitoring?
Technology can identify conditions and circumstances that indicate that controls have failed or risks are present.
Technology can ensure that items are processed accurately.
Technology can provide information more quickly.
Technology can control access to terminals and data.

Rationale
 Technology can identify conditions and circumstances that indicate that controls have failed or risks are present.
(Correct!) This answer is correct because monitoring involves collecting information to determine that controls are working.

Rationale
 Technology can ensure that items are processed accurately.
This answer is incorrect because while they represent control advantages to the use of technology, they do not relate as directly to the monitoring
component.

Rationale
 Technology can provide information more quickly.
This answer is incorrect because while they represent control advantages to the use of technology, they do not relate as directly to the monitoring
component.

Rationale
 Technology can control access to terminals and data.
This answer is incorrect because while they represent control advantages to the use of technology, they do not relate as directly to the monitoring
component.
Question 4
LOS.rlexchg.rts.0040.wml
ECON-0079
LOS: LOS.rlexchg.rts.0040.wml
Lesson Reference: Role of Exchange Rates
Difficulty: medium
Freely fluctuating exchange rates perform which of the following functions?
They automatically correct a lack of equilibrium in the balance of payments.
They make imports cheaper and exports more expensive.
They impose constraints on the domestic economy.
They eliminate the need for foreign currency hedging.

Rationale
 They automatically correct a lack of equilibrium in the balance of payments.
This answer is correct. Freely fluctuating exchange rates automatically correct a lack of equilibrium in the balance of payments by revaluing currencies.

Rationale
 They make imports cheaper and exports more expensive.
This answer is incorrect because the price of imports and exports depends on many factors in addition to the exchange rate.

Rationale
 They impose constraints on the domestic economy.
This answer is incorrect because freely fluctuating exchange rates impose no constraints on a domestic economy.

Rationale
 They eliminate the need for foreign currency hedging.
This answer is incorrect because freely fluctuating exchange rates increase the need for foreign currency hedging because rates are more volatile.
Question 5
LOS.iss.ntnl.lvl.0030.wml
aicpa.aq.iss.ntnl.lvl.001_17
LOS: LOS.iss.ntnl.lvl.0030.wml
Lesson Reference: Issues at National Level
Difficulty: hard
Bloom Code: 4
Which of the following items represents a reduction in the balance of payment accounts for the United States?
Exports of services to residents of foreign nations
Loans to domestic entities by foreign commercial banks.
Foreign purchases of assets in the United States
Import of assets from foreign countries

Rationale
 Exports of services to residents of foreign nations
Incorrect. Exports of services (or goods) create earnings and increases the current account, which increases (not decreases) the balance of payments
accounts.

Rationale
 Loans to domestic entities by foreign commercial banks.
Incorrect. Loans to U.S. entities by foreign commercial banks would be an inflow of capital that increases the capital account, which would increase
(not decrease) the balance of payment accounts.

Rationale
 Foreign purchases of assets in the United States
Incorrect. The purchase of assets in the United States by foreign buyers would create an inflow of capital that increases the capital account, which
would increase (not decrease) the balance of payments accounts.

Rationale
 Import of assets from foreign countries
Correct! The import of assets from foreign countries would be accomplished by the transfer of capital from the United States to sellers in foreign
countries that would decrease the capital accounting, which would reduce the balance of payments for the United States.
Question 6
LOS.curr.exchng.rtiss.0030.wml
ECON-0010
LOS: LOS.curr.exchng.rtiss.0030.wml
Lesson Reference: Currency Exchange Rate Issue
Difficulty: medium
If the exchange rate has changed from 1 U.S. dollar being worth 1.00 Swiss francs to a rate of 1 U.S. dollar being worth 1.10 Swiss francs,
The U.S. dollar has appreciated by 10%.
The U.S. dollar has depreciated by 10%.
The Swiss franc has appreciated by 10%.
The Swiss franc has depreciated by 20%.

Rationale
 The U.S. dollar has appreciated by 10%.
This answer is correct. If the exchange rate changes $1 being worth 1.00 francs to $1 being worth 1.1 francs, the U.S. dollar has appreciated by 10%
(1.10 – 1.00) ÷ 1.00.

Rationale
 The U.S. dollar has depreciated by 10%.
This answer is incorrect. The U.S. dollar has appreciated.

Rationale
 The Swiss franc has appreciated by 10%.
This answer is incorrect. The franc has depreciated.

Rationale
 The Swiss franc has depreciated by 20%.
This answer is incorrect. The franc has not depreciated that much.
Question 7
LOS.data.visual.0040LOS.data.visual.0030
aq.bec.data.visual.002_0319
LOS: LOS.data.visual.0030
LOS: LOS.data.visual.0040
Lesson Reference: Data Visualization
Difficulty: medium
Bloom Code: 3

The type of chart shown below, which shows changes in Apple's stock price, is useful in displaying:

Data source: Tableau Desktop software

A distribution of multiple data points.

Changes in data over time.
Part-to-whole relationships.
Simple changes to data across multiple categories.

Rationale
 A distribution of multiple data points.
Incorrect. The chart does not show the distribution of data. This would be shown in a box and whisker or histogram.

Rationale
 Changes in data over time.
Correct! This chart shows changes in Apple's stock price over about a five-year period.

Rationale
 Part-to-whole relationships.
Incorrect. This chart does not divide a whole (e.g., sales in 2014) into parts (e.g., sales from each of the company's units or divisions).

Rationale
 Simple changes to data across multiple categories.
Incorrect. There are no categories in this visualization. Hence, it is does not show data across categories.
Question 8
LOS.erm.comm.report.0030
tb.erm.comm.report.001_0718
LOS: LOS.erm.comm.report.0030
Lesson Reference: ERM Communication and Reporting
Difficulty: hard
Bloom Code: 3

Consider the following two items, which are included in a risk report received by the CEO of Kiki's Delivery Service, a global transportation and logistics
company.

#1: IT reports 17 incidents of denied attempts to access the system.

#2: IT analysis indicates a 5% probability of a level 2 system breach within the next 3 months.

Item #1 is a __________ while item #2 is a __________.

key performance indicator; key risk indicator

portfolio view of risk, risk profile view
key risk indicator; key performance indicator
risk profile view; portfolio view of risk

Rationale
 key performance indicator; key risk indicator
Correct! The historical analysis of system breaches is a key performance indicator while the analysis of the likelihood (5% probability) and severity
(level 2 breach) of the risk is a key risk indicator.

Rationale
 portfolio view of risk, risk profile view
Incorrect. Neither of these statements is a portfolio or risk profile view of risks. The first is a disclosure of risk incidents (a key performance indicator)
while the second is a key risk indicator that includes an analysis of the likelihood (5% probability) and severity (level 2 breach).

Rationale
 key risk indicator; key performance indicator
Incorrect. The historical analysis of system breaches is a key performance indicator, not a key risk indicator. The analysis of the likelihood (5%
probability) and severity (level 2 breach) is a key risk indicator, not a key performance indicator.

Rationale
 risk profile view; portfolio view of risk
Incorrect. Neither of these statements is a portfolio or risk profile view of risks. The first is a disclosure of risk incidents (a key performance indicator)
while the second is a key risk indicator that includes an analysis of the likelihood (5% probability) and severity (level 2 breach).
Question 9
LOS.it.secur.princ.0050.wml
aq.it.secur.princ.009_2017
LOS: LOS.it.secur.princ.0050.wml
Lesson Reference: IT Security Principles
Difficulty: medium
An organization implements an integrated package of authentication controls related to its critical systems. This is an example of:
Defense in depth.
Automated authentication.
Security procedure design.
Rollback and restart.

Rationale
 Defense in depth.
Correct! Defense in depth includes the implementation of multiple control layers.

Rationale
 Automated authentication.
This is incorrect. The example says nothing about the automation of authentication. Although some of the access controls are likely to be automated,
this isn't stated in the example.

Rationale
 Security procedure design.
This is incorrect. Security procedure design sounds right but is not a term from the IT access control literature.

Rationale
 Rollback and restart.
This is incorrect. Rollback and restart is a backup and recovery control process. It is unrelated to authentication controls.
Question 10
LOS.reasn.intnl.0030.wml
tbbec.reasn.intnl.001_0120
LOS: LOS.reasn.intnl.0030.wml
Lesson Reference: Introduction and Reasons for International Activity
Difficulty: medium
Bloom Code: 4
Producers in the country of Northland use 2 units of labor to produce 1 unit of wheat and 8 units of labor to produce 1 unit of barley. Producers in the country
of Southland use 4 units of labor to produce 1 unit of wheat and 16 units of labor to produce 1 unit of barley. Which of the following statements correctly
describes the production and trading relationship that should occur between Northland and Southland?
Both countries would benefit if Southland produces wheat and Northland produces barley and the countries trade with each other.
Both countries would benefit if Southland produces barley and Northland produces wheat and the countries trade with each other.
Both countries would benefit if Northland produces both barley and wheat and Southland produces only wheat and the countries trade
with each other.
Neither country would benefit from trading of wheat and barley with each other.

Rationale
 Both countries would benefit if Southland produces wheat and Northland produces barley and the countries trade with each other.
Incorrect. Both countries would not benefit if Southland produces wheat and Northland produces barley and the countries trade with each other.
Neither country would benefit from trading in wheat and barley because neither country has a competitive advantage in the production of those two
products. Northland gives up 4 units of wheat to produce 1 unit of barley (8/2), which is the same rate of exchange for Southland, which gives up 4 units
of wheat to produce 1 unit of barley (16/4). Thus, neither has a competitive advantage, and neither would benefit from trading of those products.

Rationale
 Both countries would benefit if Southland produces barley and Northland produces wheat and the countries trade with each other.
Incorrect. Both countries would not benefit if Southland produces barley and Northland produces wheat. Neither country would benefit from trading in
wheat and barley because neither country has a competitive advantage in the production of those two products. Northland gives up 4 units of wheat to
produce 1 unit of barley (8/2), which is the same rate of exchange for Southland, which gives up 4 units of wheat to produce 1 unit of barley (16/4). Thus,
neither has a competitive advantage, and neither would benefit from trading of those products.

Rationale
 Both countries would benefit if Northland produces both barley and wheat and Southland produces only wheat and the countries trade
with each other.
Incorrect. Both countries would not benefit if Northland produces both barley and wheat and Southland produces only wheat and the countries trade
with each other. Neither country would benefit from trading in wheat and barley because neither country has a competitive advantage in the
production of those two products. Northland gives up 4 units of wheat to produce 1 unit of barley (8/2), which is the same rate of exchange for
Southland, which gives up 4 units of wheat to produce 1 unit of barley (16/4). Thus, neither has a competitive advantage, and neither would benefit
from trading of those products.

Rationale
 Neither country would benefit from trading of wheat and barley with each other.
Correct! Neither country would benefit from trading wheat and barley with each other because neither country has a competitive advantage in the
production of those two products. Northland gives up 4 units of wheat to produce 1 unit of barley (8/2), which is the same rate of exchange for
Southland, which gives up 4 units of wheat to produce 1 unit of barley (16/4). Thus, neither has a competitive advantage, and neither would benefit
from trading of those products.
Question 11
LOS.mcr.envrmt.0020.wml
AICPA.101079BEC-SIM
LOS: LOS.mcr.envrmt.0020.wml
Lesson Reference: Macro-Environmental Analysis
Difficulty: medium
Bloom Code: 2
PEST is an acronym for
Political, Environmental, Social, and Technological.
Policy, Environmental, Social, and Technological.
Political, Economic, Social, and Technological.
Policy, Economic, Social, and Technological.

Rationale
 Political, Environmental, Social, and Technological.
PEST is not an acronym for "political, environmental, social, and technological," but is the acronym for "political, economic, social, and technological,"
the characteristics of a nation or region considered in macro-environmental analysis.

Rationale
 Policy, Environmental, Social, and Technological.
PEST is not an acronym for "policy, environmental, social, and technological," but for "political, economic, social, and technological," the
characteristics of a nation or region considered in macro-environmental analysis.

Rationale
 Political, Economic, Social, and Technological.
PEST is the acronym for "Political, Economic, Social, and Technological," which are the characteristics of a nation or region considered in macro-
environmental analysis.

Rationale
 Policy, Economic, Social, and Technological.
PEST is not an acronym for "policy, economic, social and technological," but for "political, economic, social, and technological," which are the
characteristics of a nation or region considered in macro-environmental analysis.
Question 12
LOS.absorb.cst.effct.0010.wml
PLAN-0004B
LOS: LOS.absorb.cst.effct.0010.wml
Lesson Reference: Absorption and Direct Costing
Difficulty: medium

Which one of the following is an advantage of using variable costing?

(This question is CMA adapted)

Variable costing complies with the U.S. Internal Revenue Code.

Variable costing complies with generally accepted accounting principles.
Variable costing makes cost-volume relationships more easily apparent.
Variable costing is most relevant to long-run pricing strategies.

Rationale
 Variable costing complies with the U.S. Internal Revenue Code.
Variable costing does not comply with the U.S. Internal Revenue Code.

Rationale
 Variable costing complies with generally accepted accounting principles.
Variable costing does not comply with generally accepted accounting principles.

Rationale
 Variable costing makes cost-volume relationships more easily apparent.
A major advantage of the use of variable costing is that it makes cost-volume relationships more apparent.

Rationale
 Variable costing is most relevant to long-run pricing strategies.
Variable costing is not most relevant to long-run pricing strategies. In the long run all costs must be recovered.
Question 13
LOS.rlexchg.rts.0020.wml
ECON-0085B
LOS: LOS.rlexchg.rts.0020.wml
Lesson Reference: Role of Exchange Rates
Difficulty: medium

Assuming exchange rates are allowed to fluctuate freely, which one of the following factors would likely cause a nation's currency to appreciate on the
foreign exchange market?

(This question is CMA adapted)

A relatively rapid rate of growth in income that stimulates imports.

A high rate of inflation relative to other countries.
A slower rate of growth in income than in other countries, which causes imports to lag behind exports.
Domestic real interest rates that are lower than real interest rates abroad.

Rationale
 A relatively rapid rate of growth in income that stimulates imports.
This answer is incorrect. If a country increases its imports, there will be an increased demand for the currencies of the countries from which the imports
originate in order to pay for the imports. This will cause the currency of the importing country to depreciate relative to the currencies of the other
countries.

Rationale
 A high rate of inflation relative to other countries.
This answer is incorrect. A higher rate of inflation depresses a country's currency because the inflation decreases the real value (purchasing power) of
the currency. As a consequence, foreign buyers and investors tend to shy away from countries with increasing inflation because goods cost more to buy
and the real return on investments gets reduced by inflation. This will cause the demand for the domestic currency to decrease relative to other
currencies and the value of that currency to depreciate, not appreciate.

Rationale
 A slower rate of growth in income than in other countries, which causes imports to lag behind exports.
If exports increase relative to imports, foreign buyers are increasing their purchases of the country's goods/services (i.e., increasing exports of that
country), which increases foreign demand for the domestic currency to pay for those goods/services. This will cause the currency to appreciate relative
to other currencies.

Rationale
 Domestic real interest rates that are lower than real interest rates abroad.
This answer is incorrect. If domestic real interest rates are lower than real interest rates abroad there will be less demand for the domestic currency for
investment purposes. As a consequence, the domestic currency will depreciate (not appreciate) relative to the currencies of other countries.
Question 14
LOS.int.entwide.cloud.syst.0020.wml
tb.int.entwide.cloud.syst.004_17
LOS: LOS.int.entwide.cloud.syst.0020.wml
Lesson Reference: Introduction to Enterprise-Wide and Cloud-Based Systems
Difficulty: hard
Bloom Code: 3
An accountant at Hubert Humbert Fashion Designers is using a component of its organization-wide ERP system to prepare a payroll tax return. The
accountant is most likely using the _________ component of the system.
CRM
OLAP
OLTP
Supply chain management

Rationale
 CRM
Incorrect. This is not a customer relations issue.

Rationale
 OLAP
Incorrect. This report would not require an online analytical processing (OLAP) system.

Rationale
 OLTP
Correct! The preparation of a simple payroll report is an application of an online transaction processing (OLTP) system.

Rationale
 Supply chain management
Incorrect. This issue is unrelated to supply chain management.
Question 15
LOS.erm.obj.set.0030
tb.erm.obj.set.003_0718
LOS: LOS.erm.obj.set.0030
Lesson Reference: ERM Strategy and Objective Setting
Difficulty: medium
Bloom Code: 2
The Buy N Large Company is a diversified, multinational consumer and wholesale products company. Which of the following is least likely to be a
consideration in defining the company's risk appetite related to sustainability and climate change risk?
The resources (e.g., financial and human) available to manage the risks.
The method of communicating the risks to internal stakeholders.
The risk profile.
The risk capability.

Rationale
 The resources (e.g., financial and human) available to manage the risks.
Incorrect. The resources available to manage risks are one consideration in defining risk appetite, since many risks could be reduced to 0 if sufficient
resources were devoted to controlling them.

Rationale
 The method of communicating the risks to internal stakeholders.
Correct! The method of communicating the risks to internal stakeholders is unlikely to influence the company risk appetite related to sustainability and
climate change risk.

Rationale
 The risk profile.
Incorrect. The company's risk profile (which includes considering the risk types, severity, and interdependence) will be a consideration in setting risk
appetite.

Rationale
 The risk capability.
Incorrect. The correct company's risk capability (i.e., the maximum amount of risk that the entity can absorb) will be a consideration in setting risk
appetite.
Question 16
LOS.macro.bsccle.0010.wml
AICPA.110504BEC
LOS: LOS.macro.bsccle.0010.wml
Lesson Reference: Business Cycles and Indicators
Difficulty: medium
Bloom Code: 2
Variations between business cycles are most likely attributable to which of the following factors?
The law of diminishing returns.
Comparative advantage.
Duration and intensity.
Opportunity costs.

Rationale
 The law of diminishing returns.
Variation between business cycles is not likely to be attributable to the law of diminishing returns. The law of diminishing returns results from adding
an increasing quantity of variable inputs (e.g., raw materials or labor) to a fixed input (e.g., factory size), which eventually results in a decreasing output
per unit of variable input because the variable inputs overwhelm the capacity of the fixed factors. Variation between business cycles is most likely
attributable to the duration and intensity of the cycles.

Rationale
 Comparative advantage.
Variation between business cycles is not likely to be attributable to comparative advantage. Comparative advantage exists when one entity has the
ability to produce goods or provide services at a lower opportunity cost than the opportunity cost of the good or service for another entity. It derives
from such factors as differences in the availability of natural resources, labor, technology, and the like. Variation between business cycles is most likely
attributable to the duration and intensity of the cycles.

Rationale
 Duration and intensity.
Business cycles are the cumulative fluctuations (up and down) in aggregate real GDP of a country and generally last for two or more years. While these
increases and decreases in real GDP tend to recur over time, there is no consistent pattern of length (duration) or magnitude (intensity) of the cycles.

Rationale
 Opportunity costs.
Variation between business cycles is probably not attributable to opportunity costs. Opportunity cost is the discounted dollar value of benefits lost
from an opportunity as a result of choosing another opportunity and is not related to business cycles. Variation between business cycles is most likely
attributable to the duration and intensity of the cycles.
Question 17
LOS.iss.ntnl.lvl.0030.wml
ECON-0095B
LOS: LOS.iss.ntnl.lvl.0030.wml
Lesson Reference: Issues at National Level
Difficulty: medium

When net exports are negative, there is a net flow of

(This question is CMA adapted)

Goods from firms in foreign countries to the domestic country.

Money from foreign countries to the firms of the domestic country.
Goods from the firms of the domestic country to foreign countries.
Goods and services which result in a trade surplus.

Rationale
 Goods from firms in foreign countries to the domestic country.
When a country has negative net exports, it imports more than it exports. Therefore, it results in a net flow of goods from firms in foreign countries to
the domestic country.

Rationale
 Money from foreign countries to the firms of the domestic country.
This answer does not identify the effect of negative net export.

Rationale
 Goods from the firms of the domestic country to foreign countries.
This answer does not identify the effect of negative net export.

Rationale
 Goods and services which result in a trade surplus.
This answer does not identify the effect of negative net export.
Question 18
LOS.erm.intro.strat.0010
CGIC-0050B
LOS: LOS.erm.intro.strat.0010
Lesson Reference: Introduction to COSO Enterprise Risk Management: Strategy and Risk
Difficulty: medium
Which of the following is not an advantage of establishing an enterprise risk management system within an organization?
Reduces operational surprises.
Provides integrated responses to multiple risks.
Eliminates all risks.
Identifies opportunities.

Rationale
 Reduces operational surprises.
This statement represents an advantage of enterprise risk management.

Rationale
 Provides integrated responses to multiple risks.
This statement represents an advantage of enterprise risk management.

Rationale
 Eliminates all risks.
An enterprise risk management system does not seek to eliminate all risks. Risks are avoided, reduced, shifted, or accepted based on the risk appetite
of the organization.

Rationale
 Identifies opportunities.
This statement represents an advantage of enterprise risk management.
Question 19
LOS.macro.agdem.0050.wml
AICPA.090513BEC-SIM
LOS: LOS.macro.agdem.0050.wml
Lesson Reference: Aggregate Demand
Difficulty: medium
Bloom Code: 2
Which of the following is most likely to decrease aggregate demand?
Increased consumer spending.
Increased export revenues.
Increased business investment.
Increasing tax rates and tax revenues.

Rationale
 Increased consumer spending.
An increase in consumer spending would increase aggregate demand, not decrease it. Increased spending would increase demand for goods and
services, not decrease that demand.

Rationale
 Increased export revenues.
An increase in export revenues would not decrease aggregate demand, but would increase that demand. To the extent that foreign consumers and
businesses buy goods from domestic entities, other things being equal, aggregate demand in the domestic economy will increase.

Rationale
 Increased business investment.
An increase in business investment is likely to increase aggregate demand, not decrease it. An increase in business investment in inventory, durable
equipment, and construction will increase demand for resources and labor. Furthermore, payments for those resources and labor will, in turn, increase
demand from suppliers and consumers.

Rationale
 Increasing tax rates and tax revenues.
An increase in tax rates and tax revenues is likely to decrease aggregate demand. Insofar as consumers pay more taxes, their consumption will decrease
and so will aggregate demand.
Question 20
LOS.glob.trd.0020.wml
AICPA.101128BEC-SIM
LOS: LOS.glob.trd.0020.wml
Lesson Reference: Globalization of Trade
Difficulty: medium
Bloom Code: 2
Which of the following enters into the determination of gross domestic product of a country?
Imports Exports
Yes Yes
Yes No
No Yes
No No

Rationale
 Yes Yes
Both a country's imports and exports enter into the determination of that country's gross domestic product. Specifically, it is net exports (exports
minus imports) that enter into the determination of gross domestic product.

Rationale
 Yes No
While a country's imports enter into the determination of that country's gross domestic product, so do its exports. Specifically, it is net exports (exports
minus imports) that enter into the determination of gross domestic product.

Rationale
 No Yes
While a country's exports enter into the determination of that country's gross domestic product, so do its imports. Specifically, it is net exports (exports
minus imports) that enter into the determination of gross domestic product.

Rationale
 No No
Both a country's imports and exports enter into the determination of that country's gross domestic product. Specifically, it is net exports (exports
minus imports) that enter into the determination of gross domestic product.