Question 1

During which stage of the industry life cycle would a firm experience stable growth in sales

Accepted Answer

A) Consolidation 
B) Relative decline 
C) Maturity 
D) Start-up 
E) Stabilization 
A) Consolidation 
B) Relative decline 
C) Maturity 
D) Start-up 
E) Stabilization

Question 2

A firm in an industry that is very sensitive to the business cycle will likely have a stock beta

Accepted Answer

A) greater than 1.0. 
B) equal to 1.0. 
C) less than 1.0 but greater than 0.0. 
D) equal to or less than 0.0. 
E) There is no relationship between beta and sensitivity to the business cycle. 
A) greater than 1.0. 
B) equal to 1.0. 
C) less than 1.0 but greater than 0.0. 
D) equal to or less than 0.0. 
E) There is no relationship between beta and sensitivity to the business cycle.

Question 3

________ is a proposition that a strong proponent of supply-side economics would most likely stress.

Accepted Answer

A) Higher marginal tax rates will lead to a reduction in the size of the budget deficit and lower interest rates as they depend on government revenues 
B) Higher marginal tax rates promote economic inefficiency and thereby retard aggregate output as they encourage investors to undertake low productivity projects with substantial tax shelter benefits 
C) Income redistribution payments will exert little impact on real aggregate supply as they do not consume resources directly 
D) A tax reduction will increase the disposable income of households, and thus, the primary impact of a tax reduction on aggregate supply will stem from the influence of the tax change on the size of the budget deficit or surplus 
E) None of the options is a likely statement for a supply-side proponent. 
A) Higher marginal tax rates will lead to a reduction in the size of the budget deficit and lower interest rates as they depend on government revenues 
B) Higher marginal tax rates promote economic inefficiency and thereby retard aggregate output as they encourage investors to undertake low productivity projects with substantial tax shelter benefits 
C) Income redistribution payments will exert little impact on real aggregate supply as they do not consume resources directly 
D) A tax reduction will increase the disposable income of households, and thus, the primary impact of a tax reduction on aggregate supply will stem from the influence of the tax change on the size of the budget deficit or surplus 
E) None of the options is a likely statement for a supply-side proponent.

Question 4

Two firms, C and D, both produce coat hangers.The price of coat hangers is $1.20 each.Firm C has total fixed costs of $750,000 and variable costs of 30¢ per coat hanger.Firm D has total fixed costs of $400,000 and variable costs of 50¢ per coat hanger.The corporate tax rate is 40%.If the economy is strong, each firm will sell 2,000,000 coat hangers.If the economy enters a recession, each firm will sell 1,400,000 coat hangers. If the economy is strong, the total revenue of firm C will be

Accepted Answer

A) $1,680,000. 
B) $1,400,000. 
C) $2,000,000. 
D) $2,400,000. 
A) $1,680,000. 
B) $1,400,000. 
C) $2,000,000. 
D) $2,400,000.

Question 5

If interest rates increase, business investment expenditures are likely to ______ and consumer durable expenditures are likely to _________.

Accepted Answer

A) increase; increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease 
E) be unaffected; be unaffected 
A) increase; increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease 
E) be unaffected; be unaffected

Question 6

A peak is

Accepted Answer

A) a transition from an expansion in the business cycle to the start of a contraction. 
B) a transition from a contraction in the business cycle to the start of an expansion. 
C) a depression that lasts more than three years. 
D) only a feature of geography and not an investment term. 
E) None of the options 
A) a transition from an expansion in the business cycle to the start of a contraction. 
B) a transition from a contraction in the business cycle to the start of an expansion. 
C) a depression that lasts more than three years. 
D) only a feature of geography and not an investment term. 
E) None of the options

Question 7

If the currency of your country is depreciating, the result should be to ______ exports and to _______ imports.

Accepted Answer

A) stimulate; stimulate 
B) stimulate; discourage 
C) discourage; stimulate 
D) discourage; discourage 
E) not affect; not affect 
A) stimulate; stimulate 
B) stimulate; discourage 
C) discourage; stimulate 
D) discourage; discourage 
E) not affect; not affect

Question 8

Two firms, A and B, both produce widgets.The price of widgets is $1 each.Firm A has total fixed costs of $500,000 and variable costs of 50¢ per widget.Firm B has total fixed costs of $240,000 and variable costs of 75¢ per widget.The corporate tax rate is 40%.If the economy is strong, each firm will sell 1,200,000 widgets.If the economy enters a recession, each firm will sell 1,100,000 widgets. Calculate firm A's degree of operating leverage.

Accepted Answer

A) 11.0 
B) 2.86 
C) 9.09 
D) 1.00 
A) 11.0 
B) 2.86 
C) 9.09 
D) 1.00

Question 9

An example of a highly cyclical industry is

Accepted Answer

A) the automobile industry. 
B) the tobacco industry. 
C) the food industry. 
D) the automobile industry and the tobacco industry. 
E) the tobacco industry and the food industry. 
A) the automobile industry. 
B) the tobacco industry. 
C) the food industry. 
D) the automobile industry and the tobacco industry. 
E) the tobacco industry and the food industry.

Question 10

If the currency of your country is appreciating, the result should be to ______ exports and to _______ imports.

Accepted Answer

A) stimulate; stimulate 
B) stimulate; discourage 
C) discourage; stimulate 
D) discourage; discourage 
E) not affect; not affect 
A) stimulate; stimulate 
B) stimulate; discourage 
C) discourage; stimulate 
D) discourage; discourage 
E) not affect; not affect

Question 11

Discuss the tools of the U.S.government's "demand-side" policy.Include in your discussion of these tools the relative advantages and disadvantages of each in terms of the effect of the use of these tools on the economy.

Accepted Answer

The two tools of the government's demand

Question 12

The "normal" range of price-earnings ratios for the S&P 500 Index is

Accepted Answer

A) between 2 and 10. 
B) between 5 and 15. 
C) less than 8. 
D) between 12 and 25. 
E) greater than 20. 
A) between 2 and 10. 
B) between 5 and 15. 
C) less than 8. 
D) between 12 and 25. 
E) greater than 20.

Question 13

Two firms, C and D, both produce coat hangers.The price of coat hangers is $1.20 each.Firm C has total fixed costs of $750,000 and variable costs of 30¢ per coat hanger.Firm D has total fixed costs of $400,000 and variable costs of 50¢ per coat hanger.The corporate tax rate is 40%.If the economy is strong, each firm will sell 2,000,000 coat hangers.If the economy enters a recession, each firm will sell 1,400,000 coat hangers. If the economy enters a recession, the tax of firm C will be

Accepted Answer

A) $1,680,000. 
B) $750,000. 
C) $510,000. 
D) $204,000. 
A) $1,680,000. 
B) $750,000. 
C) $510,000. 
D) $204,000.

Question 14

The industry with the lowest return in 2012 was

Accepted Answer

A) integrated oil and gas. 
B) telecom services. 
C) health care. 
D) business software. 
E) money center banks. 
A) integrated oil and gas. 
B) telecom services. 
C) health care. 
D) business software. 
E) money center banks.

Question 15

According to Michael Porter, there are five determinants of competition.An example of _____ is when a buyer purchases a large fraction of an industry's output and can demand price concessions.

Accepted Answer

A) threat of entry 
B) rivalry between existing competitors 
C) pressure from substitute products 
D) bargaining power of buyers 
E) bargaining power of suppliers 
A) threat of entry 
B) rivalry between existing competitors 
C) pressure from substitute products 
D) bargaining power of buyers 
E) bargaining power of suppliers

Question 16

If the economy is growing, firms with low operating leverage will experience

Accepted Answer

A) higher increases in profits than firms with high operating leverage. 
B) similar increases in profits as firms with high operating leverage. 
C) smaller increases in profits than firms with high operating leverage. 
D) no change in profits. 
A) higher increases in profits than firms with high operating leverage. 
B) similar increases in profits as firms with high operating leverage. 
C) smaller increases in profits than firms with high operating leverage. 
D) no change in profits.

Question 17

Two firms, C and D, both produce coat hangers.The price of coat hangers is $1.20 each.Firm C has total fixed costs of $750,000 and variable costs of 30¢ per coat hanger.Firm D has total fixed costs of $400,000 and variable costs of 50¢ per coat hanger.The corporate tax rate is 40%.If the economy is strong, each firm will sell 2,000,000 coat hangers.If the economy enters a recession, each firm will sell 1,400,000 coat hangers. If the economy enters a recession, the after-tax profit of firm C will be

Accepted Answer

A) $1,680,000. 
B) $750,000. 
C) $510,000. 
D) $204,000. 
E) $306,000. 
A) $1,680,000. 
B) $750,000. 
C) $510,000. 
D) $204,000. 
E) $306,000.

Question 18

Industrial production refers to

Accepted Answer

A) the amount of personal disposable income in the economy. 
B) the difference between government spending and government revenues. 
C) the total manufacturing output in the economy. 
D) the total production of goods and services in the economy. 
A) the amount of personal disposable income in the economy. 
B) the difference between government spending and government revenues. 
C) the total manufacturing output in the economy. 
D) the total production of goods and services in the economy.

Question 19

Two firms, A and B, both produce widgets.The price of widgets is $1 each.Firm A has total fixed costs of $500,000 and variable costs of 50¢ per widget.Firm B has total fixed costs of $240,000 and variable costs of 75¢ per widget.The corporate tax rate is 40%.If the economy is strong, each firm will sell 1,200,000 widgets.If the economy enters a recession, each firm will sell 1,100,000 widgets. If the economy is strong, the after-tax profit of Firm A will be

Accepted Answer

A) $0. 
B) $6,000. 
C) $36,000. 
D) $60,000. 
A) $0. 
B) $6,000. 
C) $36,000. 
D) $60,000.

Question 20

The average duration of unemployment and changes in the consumer price index for services are

Accepted Answer

A) leading economic indicators. 
B) coincidental economic indicators. 
C) lagging economic indicators. 
D) composite economic indicators. 
A) leading economic indicators. 
B) coincidental economic indicators. 
C) lagging economic indicators. 
D) composite economic indicators.

Exam 17: Macroeconomic and Industry Analysis

During which stage of the industry life cycle would a firm experience stable growth in sales

A firm in an industry that is very sensitive to the business cycle will likely have a stock beta

________ is a proposition that a strong proponent of supply-side economics would most likely stress.

If interest rates increase, business investment expenditures are likely to ______ and consumer durable expenditures are likely to _________.

A peak is

If the currency of your country is depreciating, the result should be to ______ exports and to _______ imports.

An example of a highly cyclical industry is

If the currency of your country is appreciating, the result should be to ______ exports and to _______ imports.

Discuss the tools of the U.S.government's "demand-side" policy.Include in your discussion of these tools the relative advantages and disadvantages of each in terms of the effect of the use of these tools on the economy.

The "normal" range of price-earnings ratios for the S&P 500 Index is

The industry with the lowest return in 2012 was

According to Michael Porter, there are five determinants of competition.An example of _____ is when a buyer purchases a large fraction of an industry's output and can demand price concessions.

If the economy is growing, firms with low operating leverage will experience

Industrial production refers to

The average duration of unemployment and changes in the consumer price index for services are

The Investment Environment

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

If interest rates increase, business investment expenditures are likely to and consumer durable expenditures are likely to ___.

If the currency of your country is depreciating, the result should be to exports and to _ imports.

If the currency of your country is appreciating, the result should be to exports and to _ imports.