Test 2 Part 2 - Incorrect Only

Interest rates are rising. An analyst would be most likely to state that the business cycle is in which stage?

Expansion

Gross Domestic Product (GDP) is increasing. Real interest rates are relatively high. Consumer sentiment is strong, as are auto and retail sales. Labor productivity is declining. What state of the business cycle is the economy likely experiencing?

Expansion to peak When the economy is moving from expansion to peak, labor productivity starts to decline and interest rates are at a level where the Federal Reserve Board usually starts to contract or slow economic activity.

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

Prices go up. When the rate of inflation slows and is expected to remain stable, coupons on new issue bonds will often decline to offer lower yields. The prices of outstanding bonds will go up to adjust to the lower yields on bonds of similar quality.

To determine the amount of change in the GDP from 1 year to another, both years' GDP should be converted into

constant dollars To compare GDP from 1 year to another, and thus to compare the amount of actual economic activity, economists use constant dollars to eliminate distortions caused by inflation.

LMN Manufacturing Company, listed on the NYSE, is an SEC reporting company. Each of the following would require the filing of a Form 8-K EXCEPT

relocation of wholly owned subsidiary The Form 8-K is used to report significant events that could affect the price of the company's stock. The SEC does not consider a relocation of a subsidiary to be of significant magnitude.