Series 65 Unit 6

Which of the following is most likely to be regarded as a defensive stock?

A food company stock

The Conference Board releases information about the economy on a monthly basis. Included are a number of different indicators. Economic indicators can be leading, lagging, or coincidental, which indicates the timing of their changes relative to how the economy as a whole changes. Which of the following is a lagging economic indicator?

Average prime rate

A free trade agreement is entered into between Country A and Country B. As time goes on, the value of Country A's currency increases while that of Country B's decreases. The effect of this will likely be that

Country A's imports from Country B will increase.

A free trade agreement is entered into between Country A and Country B. As time goes on, the value of Country A's currency decreases while that of Country B increases. The effect of this will likely be that

Country B's imports from Country A will increase.

Which term refers to the taxation, expenditures, and debt management of the federal government?

Fiscal policy

Which of the following statements about the federal government's fiscal policy are true? I. The federal government's fiscal policy is its policy for managing taxation, spending, and debts. II. The federal government's fiscal policy can have a great impact on the securities markets. III. The federal government finances its deficit spending by selling bonds.

I, II, III

Which of the following would not be considered a defensive security?

Steel company stock

To determine the amount of change in the GDP from one year to another, both years' GDP should be converted into

constant dollars.

Core inflation is best described as an inflation rate

that excludes certain volatile goods prices.

Ana is a bond analyst who notices a wider credit spread between Treasury bonds and AAA corporate debt. From this, she would be most likely to infer

the economy is weakening.

Overnight loans between banks are made at

the federal funds rate.

All of the following are tools that may be employed by the Federal Reserve in an effort to control the economy except

the prime rate.

All of the following actions will increase the deficit in the U.S. balance of payments except

the purchase by foreigners of U.S. securities.

When the value of the U.S. dollar decreases,

domestic manufacturers will likely increase their exports.

The gross domestic product (GDP) for the United States is composed of

the sum of all consumer goods, capital goods, and services produced in the United States and net exports to other countries.

Which of the following statements best describes what will happen when the value of the American dollar rises in relation to foreign currencies?

Foreign goods and services will become less expensive for Americans.

If the U.S. dollar is devalued relative to other world currencies, which of the following will occur with respect to the prices of goods? I. U.S. exports will be more price competitive overseas. II. U.S. exports will be less price competitive overseas. III. Foreign imported goods will be more price competitive with ours. IV. Foreign imported goods will be less price competitive with ours.

I and IV

What generally happens to outstanding fixed-income securities when the rate of inflation slows?

Prices go up.

If the U.S. dollar has been appreciating against foreign currencies, all of the following statements are true except

U.S. exports become more competitive.

With respect to the fiscal policy of the United States, the annual budget request is submitted by the

president.

A recession is defined as a drop in GDP for

two consecutive quarters.

Some prominent stock market pundits are predicting that the economy will slide into a recession in the near future. Furthermore, they are expecting moderate deflation during the same period. If this were to happen, your clients would probably enjoy the greatest overall return from investing in

U.S. Treasury bonds.

XYZ Aircraft Manufacturing Corporation, based in the United States, announces a multibillion-dollar order for its new jumbo jet from Fly Airlines, a Japanese-based carrier. When the sale is completed, there will be

a credit to the current account of the United States.

To stimulate a sluggish economy using fiscal policy measures, policymakers would

reduce income taxes.

A significant increase in the importing of goods into the United States would likely have what effect on the strength of the U.S. dollar?

Weaken

Proponents of the concept of inflation inertia believe that

prices will rise slowly and then begin to increase at a faster rate.

The research department of an investment advisory firm forecasts that the current business cycle should reach its peak within the next two months. Under such circumstances, which of the following portfolio adjustments would be most suitable for the firm's customers who actively invest in common stocks?

Defensive stocks

An economic condition where the rate of price increases reaches a stable equilibrium and stays there until a shock to the system occurs—at which time, the rate of inflation changes—is known as

inertial inflation.

When investors tend to increase their investments in debt securities on the short end of the spectrum, it generally leads to

a positive yield curve.

An investor using yield curve analysis would expect to view bonds of

a single issuer over varying maturities.

The primary function of the Federal Reserve System (the Fed) is to

carry out monetary policy.

Which of the following industries would be least cyclical?

Supermarket chain

A decrease in the value of the monetary unit is just a way of defining

inflation.

Which of the following would lead to a debit to our foreign account balance?

U.S. residents taking vacations abroad

A fixed-income investor notices that the short, intermediate, and long ends of the yield curve reflect a similar return. This would be typical of

a flat yield curve.