Question 1

________ in interest rates are associated with stock market declines.

Accepted Answer

A)   Anticipated increases
B)   Unanticipated increases
C)   Anticipated decreases
D)   Unanticipated decreases B

Question 2

Pharmaceuticals, food, and other necessities would be good performers during the ________ stage of the business cycle.

Accepted Answer

A)   peak
B)   contraction
C)   trough
D)   expansion B

Question 3

The nominal interest rate is 6%. The inflation rate is 3%. The exact real interest rate must be ________.

Accepted Answer

A)   2.91%
B)   3.85%
C)   1.45%
D)   2.12% A

Question 4

At what point in the industry life cycle are inefficiencies in competitors most likely to be removed?

Accepted Answer

A)   start-up stage
B)   consolidation stage
C)   maturity stage
D)   relative decline stage

Question 5

Which industry had the highest stock price performance in 2017 according to the text?

Accepted Answer

A)   biotech
B)   electric utilities
C)   computer systems
D)   airlines

Question 6

A supply-side economist would likely agree with which of the following statements?

Accepted Answer

A)   Real output and aggregate employment are primarily determined by aggregate demand.
B)   Real income will rise when government expenditures and tax rates increase.
C)   Real output and aggregate employment are primarily determined by tax rates.
D)   Increasing the money supply will increase real output without causing higher inflation.

Question 7

Which one of the following describes the amount by which government spending exceeds government revenues?

Accepted Answer

A)   balance of trade
B)   budget deficit
C)   gross domestic product
D)   output gap

Question 8

An investment strategy that entails shifting the portfolio into industry sectors that are expected to outperform others based on macroeconomic forecasts is termed ________.

Accepted Answer

A)   sector rotation
B)   contraction/expansion analysis
C)   life-cycle analysis
D)   business-cycle shifting

Question 9

If you believe the economy is about to go into a recession, you might change your asset allocation by selling ________ and buying ________.

Accepted Answer

A)   growth stocks; long-term bonds
B)   long-term bonds; growth stocks
C)   defensive stocks; growth stocks
D)   defensive stocks; long-term bonds

Question 10

Countercyclical fiscal policy is best described by which of the following statements?

Accepted Answer

A)   Government surpluses are planned during economic booms, and deficits are planned during economic recessions.
B)   The annual budget should always be balanced.
C)   Deficits should always equal surpluses.
D)   Government deficits are planned during economic booms, and surpluses are planned during economic recessions.

Question 11

Stalwarts are typically found in the ________ stage of the industry life cycle.

Accepted Answer

A)   start-up
B)   consolidation
C)   maturity
D)   relative decline

Question 12

The nominal interest rate is 10%. The real interest rate is 4%. The inflation rate must be ________.

Accepted Answer

A)   −6%
B)   4%
C)   5.77%
D)   14.4%

Question 13

A top-down analysis of a firm's prospects starts with an analysis of the ________.

Accepted Answer

A)   firm's position in its industry
B)   U.S. economy or even the global economy
C)   industry
D)   specific firm under consideration

Question 14

A big increase in government spending is an example of a ________.

Accepted Answer

A)   positive demand shock
B)   positive supply shock
C)   negative demand shock
D)   negative supply shock

Question 15

Inflation is caused by ________.

Accepted Answer

A)   unions
B)   rapid growth of the money supply
C)   excess supply
D)   low rates of capacity utilization

Question 16

Everything else equal, an increase in the government budget deficit would:
I. Increase the government's demand for funds
II. Shift the demand curve for funds to the left
III. Increase the interest rate in the economy

Accepted Answer

A)   II only
B)   I and II only
C)   I and III only
D)   I, II, and III

Question 17

Increases in the money supply will cause demand for investment and consumption goods to ________ in the short run and may cause prices to ________ in the long run.

Accepted Answer

A)   increase; increase
B)   increase; decrease
C)   decrease; increase
D)   decrease; decrease

Question 18

Capital goods industries such as industrial equipment, transportation, and construction would be good investments during the ________ stage of the business cycle.

Accepted Answer

A)   peak
B)   contraction
C)   trough
D)   expansion

Question 19

GDP 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

Question 20

An industry analysis for manufacturers of a small personal care gadget observed the following characteristics:
1) Industry sales have grown at 15%-20% per year in recent years and are expected to grow at 10%-15% per year over the next 3 years, still well above the economic growth rate.
2) Some U.S. manufacturers are attempting to enter fast-growing non-U.S. markets, which remain largely unexploited.
3) Some manufacturers have created a new niche in the industry by selling directly to customers through mail order. Sales for this industry segment are growing at 40% per year.
4) The current penetration rate in the United States is 60% of households and will be difficult to increase.
5) Manufacturers compete fiercely on the basis of price, and price wars within the industry are common.
6) Some manufacturers are able to develop new, unexploited niche markets in the United States based on company reputation, quality, and service.
7) Several manufacturers have recently merged, and it is expected that consolidation in the industry will increase.
8) New manufacturers continue to enter the market.
Characteristics ________ would be typical of an industry that is in the consolidation stage.

Accepted Answer

A)   6 and 7
B)   1 and 4
C)   5 and 6
D)   2 and 8

Exam 12: Macroeconomic and Industry Analysis