unit 8

During an economic recession, which of the following items will most likely increase? A) Bond prices B) Interest rates C) Inflation D) Consumer confidence and profits

A

Overnight loans between banks are made at A) the federal funds rate B) the discount rate C) the prime rate D) the call loan rate

A

Which of the following is not a characteristic of expansionary monetary policy? A) The reserve requirement will be increased. B) More funds are available for banks to lend to borrowers. C) The money supply will increase. D) Interest rates may decline

A

Increases in which of the following indicators are regarded as predictors of the level of business activity? A) Building permits B) Personal incomes C) Corporate profits D) Levels of inventories

A Increases in building permits are indicative of increased future business activity and therefore are considered a leading economic indicator. Increases in personal income reflect current, not future, activity and is therefore considered a coincident indicator. Increases in inventories indicate that goods are not being sold in anticipated quantities and functions as a disincentive to manufacturing. Buildup in inventories is a lagging economic indicator. Corporate profits are not included in the Conference Board's list of economic indicators.

An upward sloping yield curve represents all of the following EXCEPT A) time value of money B) foreign interest rate differentials C) inflation expectations D) increased risk of default over time

B

As current interest rates go up, the market price of existing corporate bonds bearing lower interest rates will A) stay the same B) decrease C) increase D) change in unpredictable ways

B

If disposable personal income has fallen steadily over the past year, which of the following is most likely going to be affected? A) Defense industry B) Automotive industry C) Firms that produce nondurable consumer goods D) Tobacco industry

B

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? U.S. exports will be more price-competitive overseas. U.S. exports will be less price-competitive overseas. Foreign imported goods will be more price-competitive with ours. Foreign imported goods will be less price-competitive with ours. A) II and III B) I and IV C) I and III D) II and IV

B

When analyzing the business cycle, you would expect which phase to occur before reaching the trough? A) Peak B) Contraction C) Recovery D) Expansion

B

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? A) Strengthen B) Fluctuation both ways C) Weaken D) No effect

C

An investor using yield curve analysis would expect to view bonds of A) similar quality over varying maturities B) varying quality over a number of maturities C) varying quality of similar maturities D) a single issuer over varying maturities

D

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? A) Manufacturers' new orders for consumer goods B) Nonagricultural employment C) Building permits (housing starts) D) Average prime rate

D

The Conference Board, a nongovernmental nonprofit organization, regularly publishes a list of economic indicators. Which of the following would be included in their list of leading indicators? A) Manufacturing and trade sales (in constant dollars) B) Average duration of unemployment C) Average prime rate D) Average weekly initial claims for unemployment insurance

D

The economic theory that says economic growth results from lower tax rates and lower government spending is A) Keynesian theory B) monetary theory C) demand-side theory D) supply-side theory

D

The research department of an investment advisory firm forecasts that the current business cycle should reach its peak within the next 2 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? A) Cyclical stocks B) Aggressive growth stocks C) Corporate bonds D) Defensive stocks

D

Question ID: 1181140 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 A) real estate B) U.S. Treasury bonds C) commodities D) common stock

B

When investors tend to increase their investments in debt securities into those on the short end of the spectrum, it generally leads to A) long-term yields that greatly exceed short-term yields B) a positive yield curve C) an inverted yield curve D) a flat yield curve

B

Which of the following industries would be least cyclical? A) Heavy equipment B) Supermarket chain C) Leisure products D) Automobile manufacturing

B

You note that an article in the Wall Street Journal points out that the money supply has been increasing. This economic measure is A) a coincident indicator B) a leading indicator C) a GDP deflator D) a lagging indicator

B

During an economic recession, which of the following items will most likely increase? A) Interest rates B) Bond prices C) Inflation D) Consumer confidence and profits

B During a recessionary period, inflation and interest rates generally decline. This causes bond prices to increase because they are inversely related to the change in interest rates. Consumer confidence and profits are declining at this point in the economic cycle.

If the dollar weakens, which of the following statements is TRUE? A) Foreign securities denominated in their domestic currency decrease in value to the U.S. investor. B) The dollar buys more foreign currency. C) An increase in U.S. interest rates might strengthen the dollar. D) U.S. exports become less competitive.

C

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 coincident economic indicator? A) Stock market prices as measured by the S&P 500 B) Agricultural employment C) Industrial production D) Machine tool orders

C

Which of the following would probably NOT be an attractive investment during periods of rising inflation? A) Oil stocks B) Gold C) Corporate bonds D) Real estate

C

With respect to the fiscal policy of the United States, the annual budget request is submitted by the A) Federal Reserve Board B) Congress C) president D) Internal Revenue Service

C

All of the following are leading indicators for economic growth EXCEPT A) stock prices as measured by the S&P 500 index B) average weekly initial claims for state unemployment compensation C) average prime rate D) orders for durable goods

C The average prime rate is a lagging indicator. The duration of unemployment is also a lagging indicator, but the number of initial unemployment claims is a leading indicator. The S&P 500 index and orders for durable goods are leading economic indicators.