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BA1 CIMA Fundamentals of Business Economics Free Practice Exam Questions (2025 Updated)

Prepare effectively for your CIMA BA1 Fundamentals of Business Economics certification with our extensive collection of free, high-quality practice questions. Each question is designed to mirror the actual exam format and objectives, complete with comprehensive answers and detailed explanations. Our materials are regularly updated for 2025, ensuring you have the most current resources to build confidence and succeed on your first attempt.

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Total 468 questions

A country's gross national product (GNP) will be higher than gross domestic product (GDP) if:

A.

indirect taxes are greater than government subsidies

B.

there is a net inflow of factor payments on the balance of payments

C.

the country's imports are greater than its exports

D.

government tax income is greater than government expenditure

The level of national income in the circular flow will remain constant if

A.

injections are greater than withdrawals

B.

injections are equal to withdrawals

C.

injections are equal to savings

D.

injections plus withdrawals are equal to savings plus investment

Part of a country's unemployment figures will consist of people moving between jobs. Which type of unemployment is this?

A.

Structural unemployment

B.

Cyclical (or demand deficient) unemployment

C.

Frictional unemployment

D.

Real wage unemployment

A country is a net oil exporter and the demand for oil overseas is price inelastic. A substantial increase in the world price of oil would tend to

A.

Improve the country's balance of payments on current account

B.

Improve the price competitiveness of manufacturing firms in the country

C.

Cause the country's terms of trade to deteriorate

D.

Increase GDP but not GNP in the country

Which ONE of the following would best indicate that economic growth is taking place?

An increase in:

A.

The economy's output gap

B.

Investment to make good wear and tear of the national capital stock

C.

Investment in human capital

D.

Gross domestic product sustained over a number of years

When faced with a recession, the appropriate combination of policies for a government in order to generate a recovery is

A.

Tax cuts, reduced public expenditure and lower interest rates.

B.

Monetary expansion, increases in public expenditure and an appreciation of the exchange rate.

C.

Reduction of the fiscal deficit and increased money supply.

D.

Tax cuts, monetary expansion and a depreciation of the exchange rate.

Which of the following is not likely to result from a fall in the rate of interest?

A.

Increased consumption

B.

Increased investment

C.

A higher exchange rate

D.

An increase in aggregate demand

If in a boom a government adopted a contractionary (restrictive) monetary policy, a typical business would expect to experience:

i. Higher interest payments on its bank borrowing.

ii. Falling credit based sales.

iii. Higher income and corporate taxes.

iv. Lower sales to government agencies.

v. Difficulties in securing working capital

vi. Higher prices for imported components.

A.

(i), (ii) and (vi) only

B.

(i), (ii) and (v) only

C.

(ii), (iii) and (iv) only

D.

(i), (iii) and (iv) only

In the aggregate supply and demand model, a significant rise in the cost of energy for industry would lead to the

A.

Aggregate supply curve moving to the right

B.

Aggregate supply curve moving to the left

C.

Aggregate demand curve moving to the right

D.

Aggregate demand curve moving to the left

Which of the following is an invisible import for a country?

A.

Expenditure in its shops by foreign diplomats based in the country

B.

The country's contribution to foreign aid

C.

A foreign company signing a contract guaranteeing to invest in a new factory in the country

D.

Repayment of an IMF loan by the country's government

Which global financial institution is responsible for providing stabilization funding to assist developed and developing countries with short term borrowing needs and needs for foreign currency?

A.

The IMF

B.

The World Bank

C.

The World Trade Organization

D.

The G20

If a country joined an economic union (for example, the European Union) its business sector could benefit from all of the following except which one?

A.

Higher profit margins due to a reduction in transport costs.

B.

Economies of scale as it gained access to a larger market.

C.

Lower input costs as imports from other member states would become cheaper.

D.

Reduced costs as a result of access to a wider supply of factors of production.

In a fully employed economy, which one of the following would lead to demand pull inflation?

A.

A reduction in the rate of income tax

B.

A rise in value added tax

C.

An increase in the world price of oil

D.

A rise in interest rates

All of the following would result from a shift from direct to indirect taxes except which one?

A.

An increase in the prices of products due to inflation.

B.

A reduction in the disincentive to work and effort.

C.

A more progressive taxation system.

D.

A shift in the burden of taxation towards lower income groups.

Which ONE of the following best explains the statement 'In not for profit organizations money is a constraint and not a goal'?

A.

Money be ignored because reaching the goals of the organization is all that matters

B.

There is no need for the organization to be efficient

C.

There is a trade off between financial and non-financial goals

D.

Money limits how far the organization can achieve its goals

The existence of a natural rate of unemployment means that

A.

the short run Phillips curve is steeper that the long run Phillips curve.

B.

nominal wages rise faster the prices in the long run.

C.

governments cannot reduce unemployment below this level.

D.

there is no trade-off between inflation and unemployment in the long run.

A 'supply-side' economist would recommend that in the long term, a country's unemployment problem should be tackled by

A.

A reduction in the money supply

B.

Income tax cuts to promote labor market incentives

C.

Tax cuts to expand aggregate demand

D.

Increasing the job-seekers allowance and the period for which it can be claimed

All of the following items would appear as a credit on the current account of a country's balance of payments accounts except which one?

A.

Interest payments on financial assets held overseas.

B.

Exports of manufactured goods.

C.

Outflows of capital.

D.

Expenditure by visiting foreign tourists.

All of the following are features of an economic union (for example, the European union) except which one?

A.

A fixed exchange rate relative to non union currencies.

B.

Free movement of goods and services between member states.

C.

A common external tariff.

D.

Free movement of factors of production between member states.

All of the following would lead to fall in the circular flow of national income except which one ?

A.

A fall in business investment

B.

A fall in personal savings rates

C.

A reduction in the level of government expenditure

D.

A rise in the marginal propensity to save

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