Question 1

Stock market bubbles are

Accepted Answer

A) created when investors stray from the fundamental determinant of corporate earnings and give too much attention to interest rates. 
B) created when investors stray from the fundamental determinant of interest rates and give too much attention to corporate earnings. 
C) created when investors stray from the fundamental determinants of corporate earnings and interest rates and give too much attention to what the stock will be worth next year. 
D) created when investors pay too much attention to the fundamental determinants. 
A) created when investors stray from the fundamental determinant of corporate earnings and give too much attention to interest rates. 
B) created when investors stray from the fundamental determinant of interest rates and give too much attention to corporate earnings. 
C) created when investors stray from the fundamental determinants of corporate earnings and interest rates and give too much attention to what the stock will be worth next year. 
D) created when investors pay too much attention to the fundamental determinants.

Question 2

Which of the following stock market decreases is best explained by the notion of a bubble collapsing?

Accepted Answer

A) The early 1982 drop in the DJIA. 
B) The decade of the 1970s. 
C) The U.S. stock market in late 1929. 
D) The U.S. stock market's drop in late 2008. 
A) The early 1982 drop in the DJIA. 
B) The decade of the 1970s. 
C) The U.S. stock market in late 1929. 
D) The U.S. stock market's drop in late 2008.

Question 3

Enron's bankruptcy is much more troubling than Kmart's or Global Crossing's because

Accepted Answer

A) Enron was much bigger. 
B) Enron had more employees. 
C) Enron had more stockholders. 
D) Enron's trouble resulted from corrupt accounting practices. 
A) Enron was much bigger. 
B) Enron had more employees. 
C) Enron had more stockholders. 
D) Enron's trouble resulted from corrupt accounting practices.

Question 4

If a company is expected to earn $1 per share this year and 2% more per share each subsequent year, the stock price in an efficient market will reflect

Accepted Answer

A) the $1 per share, but ignore the 2% annual growth. 
B) neither of these pieces of information. 
C) the 2% annual growth but not the starting point of $1 per share. 
D) both of these pieces of information. 
A) the $1 per share, but ignore the 2% annual growth. 
B) neither of these pieces of information. 
C) the 2% annual growth but not the starting point of $1 per share. 
D) both of these pieces of information.

Question 5

An important factor in stock prices that is separate from interest rates and profit expectations is

Accepted Answer

A) the expected price of the stock in the near future. 
B) CEO desires. 
C) Board of Directors' mandates on stock prices. 
D) Securities and Exchange Commission mandates on stock prices. 
A) the expected price of the stock in the near future. 
B) CEO desires. 
C) Board of Directors' mandates on stock prices. 
D) Securities and Exchange Commission mandates on stock prices.

Question 6

Which of the following stock market increases is best explained by the notion of a bubble?

Accepted Answer

A) The late 1982 rally in which the DJIA doubled in 4 months. 
B) The decade of the 1980s. 
C) The U.S. stock market in the late 1920s. 
D) The U.S. stock market's growth in 2009. 
A) The late 1982 rally in which the DJIA doubled in 4 months. 
B) The decade of the 1980s. 
C) The U.S. stock market in the late 1920s. 
D) The U.S. stock market's growth in 2009.

Question 7

When stock markets crash because of changes in the expected future sale price of an asset rather than changes in fundamental stock price determinants, economists refer to the situation as

Accepted Answer

A) God's will. 
B) just desserts. 
C) a ghost. 
D) a bubble. 
A) God's will. 
B) just desserts. 
C) a ghost. 
D) a bubble.

Question 8

A "common" logarithm is the logarithm of the

Accepted Answer

A) base "e". 
B) base 2. 
C) base 10. 
D) power of two. 
A) base "e". 
B) base 2. 
C) base 10. 
D) power of two.

Question 9

The creation and deflation of economic bubbles impacts the sale of homes, cars and other expensive goods because

Accepted Answer

A) higher stock prices make people feel poorer so they buy fewer of these things. 
B) higher stock prices make people feel richer so they buy more of these things. 
C) higher interest rates make people more able to borrow money to buy these things. 
D) the creation of bubbles lowers the prices of these things and their deflation stimulates purchases. 
A) higher stock prices make people feel poorer so they buy fewer of these things. 
B) higher stock prices make people feel richer so they buy more of these things. 
C) higher interest rates make people more able to borrow money to buy these things. 
D) the creation of bubbles lowers the prices of these things and their deflation stimulates purchases.

Question 10

Which of the following stock market decreases is best explained by the notion of a bubble collapsing?

Accepted Answer

A) The early 1982 drop in the DJIA. 
B) The decade of the 1970s. 
C) The Japanese stock market in late 1990. 
D) The U.S. stock market's drop in late 2008. 
A) The early 1982 drop in the DJIA. 
B) The decade of the 1970s. 
C) The Japanese stock market in late 1990. 
D) The U.S. stock market's drop in late 2008.

Question 11

An important function of stock sales after the IPO is to equalize

Accepted Answer

A) profits across industries. 
B) profits across firms within industries. 
C) risk-unadjusted rates of return. 
D) risk-adjusted rates of return. 
A) profits across industries. 
B) profits across firms within industries. 
C) risk-unadjusted rates of return. 
D) risk-adjusted rates of return.

Question 12

Suppose you hear an investor say "I just don't have time to research the companies of the stock I buy, so I trust that the market has taken everything into account in setting current prices and just buy a well-diversified portfolio." You would understand that person to believe in

Accepted Answer

A) efficient markets. 
B) prayer. 
C) guesswork. 
D) technical investing. 
A) efficient markets. 
B) prayer. 
C) guesswork. 
D) technical investing.

Question 13

From 1982 until 2000, stock prices rose dramatically. As measured by the Dow Jones Industrial Average, stocks went from under _____ to above _______ during this period.

Accepted Answer

A) 1,000; 11,000 
B) 200; 1,400 
C) 400; 5,000 
D) 10,000; 200,000 
A) 1,000; 11,000 
B) 200; 1,400 
C) 400; 5,000 
D) 10,000; 200,000

Question 14

If the expected future price of a stock is revised upward and all else is equal, today's price of the stock will

Accepted Answer

A) fall. 
B) rise. 
C) remain unchanged. 
D) adjust to reflect a lower ratio of price to (current)earnings. 
A) fall. 
B) rise. 
C) remain unchanged. 
D) adjust to reflect a lower ratio of price to (current)earnings.

Question 15

Suppose you hear an investor say "I can't out guess the maker." You would understand that person to believe in

Accepted Answer

A) efficient markets. 
B) prayer. 
C) the ABC approach. 
D) technical investing. 
A) efficient markets. 
B) prayer. 
C) the ABC approach. 
D) technical investing.

Question 16

Which of the following is considered by economists as a fundamental determinant of stock prices?

Accepted Answer

A) Interest rates 
B) CEO desires 
C) Board of Directors' mandates on stock prices 
D) Securities and Exchange Commission officers 
A) Interest rates 
B) CEO desires 
C) Board of Directors' mandates on stock prices 
D) Securities and Exchange Commission officers

Question 17

If the price of a company's stock truly reflects the value of a share in the company, then

Accepted Answer

A) it is impossible for the stock price to change by 20% in a single day, as in 1987. 
B) it is impossible for the stock price to increase by 84% within a single year, as in 1999. 
C) stock prices can only change abruptly when accounting scandals are uncovered, as in 2002. 
D) abrupt stock price changes reflect abrupt changes in the public's perception of fundamentals and risk. 
A) it is impossible for the stock price to change by 20% in a single day, as in 1987. 
B) it is impossible for the stock price to increase by 84% within a single year, as in 1999. 
C) stock prices can only change abruptly when accounting scandals are uncovered, as in 2002. 
D) abrupt stock price changes reflect abrupt changes in the public's perception of fundamentals and risk.

Exam 44: The Stock Market Crashes

Stock market bubbles are

Which of the following stock market decreases is best explained by the notion of a bubble collapsing?

Enron's bankruptcy is much more troubling than Kmart's or Global Crossing's because

If a company is expected to earn $1 per share this year and 2% more per share each subsequent year, the stock price in an efficient market will reflect

An important factor in stock prices that is separate from interest rates and profit expectations is

Which of the following stock market increases is best explained by the notion of a bubble?

When stock markets crash because of changes in the expected future sale price of an asset rather than changes in fundamental stock price determinants, economists refer to the situation as

A "common" logarithm is the logarithm of the

The creation and deflation of economic bubbles impacts the sale of homes, cars and other expensive goods because

Which of the following stock market decreases is best explained by the notion of a bubble collapsing?

An important function of stock sales after the IPO is to equalize

Suppose you hear an investor say "I just don't have time to research the companies of the stock I buy, so I trust that the market has taken everything into account in setting current prices and just buy a well-diversified portfolio." You would understand that person to believe in

From 1982 until 2000, stock prices rose dramatically. As measured by the Dow Jones Industrial Average, stocks went from under _____ to above _______ during this period.

If the expected future price of a stock is revised upward and all else is equal, today's price of the stock will

Suppose you hear an investor say "I can't out guess the maker." You would understand that person to believe in

Which of the following is considered by economists as a fundamental determinant of stock prices?

If the price of a company's stock truly reflects the value of a share in the company, then

Economics: the Study of Opportunity Cost

Supply and Demand

The Concept of Elasticity and Consumer and Producer Surplus

Firm Production, Cost, and Revenue

Perfect Competition, Monopoly, and Economic Versus Normal Profit

Every Macroeconomic Word You Ever Heard: Gross Domestic Product, Inflation, Unemployment, Recession, Depression

Interest Rates and Present Value

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Policy

Federal Spending

Federal Deficits, Surpluses, and the National Debt

The Housing Bubble

The Recession of 2007-2009: Causes and Policy Responses

Is Economic Stagnation the New Normal

Is the Fiscalsky Falling: An Examination of Unfunded Social Security, Medicare, and State and Local Pension Liabilities

International Trade: Does It Jeopardize American Jobs

International Finance and Exchange Rates

The European Debt Crisis

Economic Growth and Development

Nafta, Gatt, Wto: Are Trade Agreements Good for Us

The Line Between Legal and Illegal Goods

Natural Resources, the Environment, and Climate Change

Health Care

Government-Provided Health Insurance: Medicaid, Medicare, and the Child Health Insurance Program

The Economics of Prescription Drugs

So You Want to Be a Lawyer: Economics and the Law

The Economics of Crime

Antitrust

The Economics of Race and Discrimination

Income and Wealth Inequality

Farm Policy

Minimum Wage

Ticket Brokers and Ticket Scalping

Rent Control

Economics of K-12 Education

Economics of College and University Education

Poverty and Welfare

Head Start

Social Security

Personal Income Taxes

Energy Prices

If We Build It, Will They Come and Other Sports Questions

Unions

Walmart: Always Low Prices and Low Wages- Always

The Economic Impact of Casino Gambling

The Economics of Terrorism

Filters

From 1982 until 2000, stock prices rose dramatically. As measured by the Dow Jones Industrial Average, stocks went from under _ to above ___ during this period.