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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

Company X's government has seen the the balance of payments deficit steadily rising while they have been in power.

Which of the following would be a good policy to implement to counteract this?

A.

Decrease the interest rates across the whole economy to limit foreign investment

B.

Reduce bureaucracy by removing quotas and obligations for imported goods

C.

Increase the rate of income tax by 10% in each bracket

D.

Increase the rate of interest in the economy by 5%

Miss Ruby designs and makes large ornaments for grand buildings. She is informed that her range of candle sticks have a price elasticity of-1.2

Which of the following plans would be most appropriate?

A.

Produce more candlesticks

B.

Create more ornate candlesticks which have a higher cost per product

C.

Run an expensive ad campaign in an interior design magazine

D.

Increase the price of candle sticks

Pills Pharmaceuticals has founded a new department which focuses on big data analysis. The organisation plans to perform this analysis using data collected by two subsidiaries, one based in London and the other in San Francisco.

Which of Gartner's 'Three Vs' is applicable to this scenario?

A.

Variety

B.

Volume

C.

Velocity

D.

Verification

Which of the following will NOT affect the price elasticity of supply?

A.

The time period considered.

B.

Production costs.

C.

The level of stocks.

D.

Proportion of income spent.

A wireless phone manufacturer currently sells 2,000 units per quarter at a price of $400 The estimated price elasticity of demand is -2.5.

The manufacturer is considering an increase in the price to $440

What will this raise (+) or reduce (-) total revenue by? Give your answer in whole numbers.

jerry has just been appointed the director of Foodgo Pic, an international supermarket chain. He outlines his main priorities to his staff, which are as follows:

1: To increase sales from £23bn per year to £30bn per year within the next five years.

2: To increase the number of items stocked in Foodgo stores to attract more customers.

3: To prioritise sales figures over profits, which have been stagnant for five years.

Which of the following best describes why shareholders may be unhappy with jerry's approach to the business?

A.

A focus on sales rather than profits would mean shareholder dividends may decrease

B.

An increase in the number of products in Foodgo stores will likely lead to increased footfall and hence increased sales and profits

C.

The increase of sales from £23bn a year to £30bn a year is not ambitious enough and needs to be revised

D.

An increase in sales will lead to a fall in the price of shares in Foodgo Pic, meaning shareholders will receive less in dividends

Governments provide public goods, such as street lighting, because

A.

private business providers would exploit consumers and make excess profits

B.

it would be an unprofitable activity for private business because of the free-rider problem

C.

governments are more efficient producers of such goods

D.

there are significant external costs in the production process

Vencia has recently been faced with international condemnation due to its tendency to engage in 'dirty floating'. This is combined with high interest rates as well as underdeveloped industries.

What would likely be the result of these conditions on Vencia's trade?

A.

A lack of investment from businesses in the long-term

B.

Some investment in the short-term due to high interest rates

C.

Other countries responding to Vencia's 'dirty floating' in a protectionist manner

D.

The Bank of Vencia buying treasury bonds to loosen its monetary policy

E.

The government of Vencia increasing its VAT and basic rate of income tax further

Pills Pharmaceuticals have compiled a component bar chart detailing the proportion of sales revenue the organisation receives from the sale of three groups of products: medical devices, contraceptives and day-to-day or prescription drugs.

In Month 2, which was the most profitable type of product?

A.

Pills Medical Devices

B.

Pills Contraceptives

C.

Pills Day-to-Day Tablets

A bottle of brandy costs £25 in Country X, including both unit tax and ad valorem tax. These taxes are applied throughout the production process.

Which of the following applies to this particular scenario? Select ALL that apply.

A.

The ad valorem tax acts as a sales tax

B.

Both taxes can be classed as multi-stage consumption taxes

C.

The unit tax is otherwise known as stamp duty

D.

The taxes levied on the brandy are charged in a similar way to sales tax in the United States

E.

The taxes levied on the brandy are proportional

A regressive tax is defined as one where:

A.

The amount of tax paid by a taxpayer falls as income rises

B.

The rate of tax is different for different income levels

C.

The proportion of income paid in tax rises as income falls

D.

The tax is levied on expenditure not income

Atu, a new social media platform, has launched an advertising campaign directed at areas of Country X where there is a higher proportion of young people than elsewhere.

Which source is most likely to have been used by Atu to acquire this data?

A.

Demographic statistics published in a census

B.

The l{ addresses of computers in these areas

C.

The level of youth unemployment as recorded by the government

D.

The prominence of other brands focused on young people in the area

The managing director of Polly's has been given a pie chart showing the current proportion of sales across the chain's five stores.

Which of the below are the most significant reasons why the pie chart is an inappropriate way of expressing this data?

Select ALL that apply.

A.

It cannot be used to develop sales strategies moving forward

B.

It does not give specific details as to which items sold in store are experiencing poor sales

C.

It does not show the best and worst performing stores

D.

It does not track sales over time

E.

It does not show the store sales as raw figures

ToyTown, a soft toy manufacturer, produces what it claims to be the cheapest teddy bears on the market. The graph shows the current price of a ToyTown teddy bear and its relationship to the demand for ToyTown teddy

bears.

If the price of ToyTown teddy bears were to increase, what would happen to the demand?

A.

Demand would fall as consumers would look for alternative teddy bears to buy

B.

Demand would increase because the teddy bears would be seen as more prestigious by consumers due to their higher prices

C.

Demand would fall as the relationship between price and demand as shown in the graph is inelastic

D.

Demand would increase as the relationship between price and demand as shown in the graph is elastic

Bishops Financial Services has outsourced its HR Department to Resources4U.

Which of the following is most likely to be considered when deciding to outsource parts of the business to another company?

A.

Resources4U's lack of business history

B.

The cost of increasing the number of staff on the payroll

C.

The small size of Bishops Financial Services as a business

D.

The possibility of contract renegotiation at a future date

The government has set a maximum house price due to a massive house price rise in the last decade. This is denoted by the line Q1Q2 on the graph.

Which of the following may occur in light of the introduction of the maximum house price as it appears on the graph?

Select ALL that apply.

A.

There will be a shortage of housing supply in Lingford.

B.

A 'black market' may develop in housing, meaning the maximum price is ignored.

C.

There will be a surplus of housing supply in Lingford.

D.

Landowners will continue to build residential properties at the same rate as before the maximum price was implemented.

E.

It is not likely that the maximum house price will need some sort of reform in the near future.

The Lingford Miracle Association is a registered charity. It is closely associated with Lingford General Hospital. The charity has a number of goals.

Which of the following could potentially be goals set out by the Lingford Miracle Association given the information about the organisation that has been outlined?

A.

To provide care for those who are terminally ill

B.

To maintain a reasonable profit which can then be given as dividends to shareholders

C.

To use the funding provided by government to further the primary cause of the organisation

D.

To offer bonuses to the managing director of the organisation when a certain number of sales is reached in a year

E.

To encourage members of the public to invest in the organisation through buying shares

A business has a contractual requirement to pay a sum of$6m in a foreign currency in 12 months time. It takes out a forward exchange contract from this sum.

A.

This is an example of

B.

Translation risk avoidance

C.

Arbitrage

D.

hedging

In fiscal policy, the term automatic stabilizer refers to any factor that

A.

Operates to reduce cyclical fluctuations in output without active government policy.

B.

That causes aggregate demand to rise in recession and fall in booms.

C.

Prevents the government budget from moving too far into surplus or deficit.

D.

Prevents recessions and booms by ensuring that aggregate demand remains constant.

VapNat, an e-cigarette store, has experienced a steep decline in sales over the past six months, despite the economy in general performing well.

Which of the following are most likely to have contributed to such a decline?

Select ALL that apply.

A.

Social factors

B.

Tech nological factors

C.

Legal factors

D.

Environmental factors

E.

Political factors

F.

Economic factors

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