Question 1

Assume that the Federal Reserve decreases the money supply. This action will cause ________ to decrease.

Accepted Answer

A)  interest rates 
B)  the unemployment rate 
C)  -investment in the economy 
D)  trade balance 
A)  interest rates 
B)  the unemployment rate 
C)  -investment in the economy 
D)  trade balance

Question 2

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 enters a recession, the after-tax profit of Firm A will be

Accepted Answer

A)  $0. 
B)  $6,000. 
C)  -$30,000. 
D)  $60,000. 
E)  None of the options are correct. 
A)  $0. 
B)  $6,000. 
C)  -$30,000. 
D)  $60,000. 
E)  None of the options are correct.

Question 3

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 total cost of firm C will be

Accepted Answer

A)  $1,680,000. 
B)  -$1,170,000. 
C)  $750,000. 
D)  $420,000. 
A)  $1,680,000. 
B)  -$1,170,000. 
C)  $750,000. 
D)  $420,000.

Question 4

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

Accepted Answer

A)  increase; increase 
B)  -increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
E)  not affect; not affect 
A)  increase; increase 
B)  -increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
E)  not affect; not affect

Question 5

A trough 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 something used by farmers to feed pigs and not an investment term. 
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 something used by farmers to feed pigs and not an investment term.

Question 6

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 7

The stock price index and new orders for nondefense capital goods are

Accepted Answer

A)  -leading economic indicators. 
B)  coincidental economic indicators. 
C)  lagging economic indicators. 
D)  not useful as economic indicators. 
A)  -leading economic indicators. 
B)  coincidental economic indicators. 
C)  lagging economic indicators. 
D)  not useful as economic indicators.

Question 8

Which of the following are examples of defensive industries?

Accepted Answer

A)  Food producers 
B)  Durable goods producers 
C)  Pharmaceutical firms 
D)  Public utilities 
E)  -Food producers, pharmaceutical firms, and public utilities 
A)  Food producers 
B)  Durable goods producers 
C)  Pharmaceutical firms 
D)  Public utilities 
E)  -Food producers, pharmaceutical firms, and public utilities

Question 9

The process of estimating the dividends and earnings that can be expected from the firm based on determinants of value is called

Accepted Answer

A)  business-cycle forecasting. 
B)  macroeconomic forecasting. 
C)  technical analysis. 
D)  -fundamental analysis. 
E)  None of the options are correct. 
A)  business-cycle forecasting. 
B)  macroeconomic forecasting. 
C)  technical analysis. 
D)  -fundamental analysis. 
E)  None of the options are correct.

Question 10

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 11

Assume the U.S. government was to decide to increase the budget field. Holding all else constant, this will cause ______ to decrease.

Accepted Answer

A)  interest rates 
B)  government borrowing 
C)  unemployment 
D)  -interest rates and government borrowing 
E)  None of the options are correct. 
A)  interest rates 
B)  government borrowing 
C)  unemployment 
D)  -interest rates and government borrowing 
E)  None of the options are correct.

Question 12

________ 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 13

A firm in the early stages of the industry life cycle will likely have

Accepted Answer

A)  high market penetration. 
B)  high risk. 
C)  rapid growth. 
D)  high market penetration and rapid growth. 
E)  -high risk and rapid growth. 
A)  high market penetration. 
B)  high risk. 
C)  rapid growth. 
D)  high market penetration and rapid growth. 
E)  -high risk and rapid growth.

Question 14

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 15

Supply-side economists wishing to stimulate the economy are most likely to recommend

Accepted Answer

A)  a decrease in the money supply. 
B)  a decrease in production output. 
C)  an increase in the real interest rate. 
D)  a decrease in the tax rate. 
E)  -an increase in mortgage rates. 
A)  a decrease in the money supply. 
B)  a decrease in production output. 
C)  an increase in the real interest rate. 
D)  a decrease in the tax rate. 
E)  -an increase in mortgage rates.

Question 16

A top-down analysis of a firm's prospects starts with

Accepted Answer

A)  an examination of the firm's industry. 
B)  an evaluation of the firm's position within its industry. 
C)  a forecast of interest-rate movements. 
D)  -an assessment of the broad economic environment. 
E)  the application of the CAPM to find the firm's theoretical return. 
A)  an examination of the firm's industry. 
B)  an evaluation of the firm's position within its industry. 
C)  a forecast of interest-rate movements. 
D)  -an assessment of the broad economic environment. 
E)  the application of the CAPM to find the firm's theoretical return.

Question 17

Fiscal policy is difficult to implement quickly because

Accepted Answer

A)  it requires political negotiations. 
B)  much of government spending is nondiscretionary and cannot be changed. 
C)  increases in tax rates affect consumer spending gradually. 
D)  -it requires political negotiations, and much of government spending is nondiscretionary and cannot be changed. 
E)  it requires political negotiations, and increases in tax rates affect consumer spending gradually. 
A)  it requires political negotiations. 
B)  much of government spending is nondiscretionary and cannot be changed. 
C)  increases in tax rates affect consumer spending gradually. 
D)  -it requires political negotiations, and much of government spending is nondiscretionary and cannot be changed. 
E)  it requires political negotiations, and increases in tax rates affect consumer spending gradually.

Question 18

Assume the U.S. government was to decide to increase the budget field. Holding all else constant, this will cause ______ to decrease.

Accepted Answer

A)  interest rates 
B)  government borrowing 
C)  unemployment 
D)  -interest rates and government borrowing 
E)  None of the options are correct. 
A)  interest rates 
B)  government borrowing 
C)  unemployment 
D)  -interest rates and government borrowing 
E)  None of the options are correct.

Question 19

Investors can ______ invest in an industry with the highest expected return by purchasing ______.

Accepted Answer

A)  -most easily; industry-specific iShares 
B)  not; industry-specific iShares 
C)  most easily; industry-specific ADRs 
D)  not; individual stocks 
E)  None of the options are correct. 
A)  -most easily; industry-specific iShares 
B)  not; industry-specific iShares 
C)  most easily; industry-specific ADRs 
D)  not; individual stocks 
E)  None of the options are correct.

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

Assume that the Federal Reserve decreases the money supply. This action will cause ________ to decrease.

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

A trough is

The stock price index and new orders for nondefense capital goods are

Which of the following are examples of defensive industries?

The process of estimating the dividends and earnings that can be expected from the firm based on determinants of value is called

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

Assume the U.S. government was to decide to increase the budget field. Holding all else constant, this will cause ______ to decrease.

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

A firm in the early stages of the industry life cycle will likely have

Supply-side economists wishing to stimulate the economy are most likely to recommend

A top-down analysis of a firm's prospects starts with

Fiscal policy is difficult to implement quickly because

Assume the U.S. government was to decide to increase the budget field. Holding all else constant, this will cause ______ to decrease.

Investors can ______ invest in an industry with the highest expected return by purchasing ______.

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

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

Investors can invest in an industry with the highest expected return by purchasing .