Macro Chapter 6

A corporation is controlled by its ___.

common stockholders

A corporation is owned by its ___ and its ____.

common stockholders and preferred stockholders

27. Our capacity utilization rate is usually between _______. a) 10 and 30 b) 30 and 50 c) 50 and 70 d) 70 and 90

d) 70 and 90

25. Each of the following is business investment EXCEPT ____. a) inventory investment b) investment in new plant c) investment in new equipment d) investment in new residential housing

d) investment in new residential housing

In Marx's terms, the people who wait outside the factory gates for work are the _____.

reserve army of the unemployed

A partnership is owned by ___ people.

two or more

According to Karl Marx, capital was created by the _____ and expropriated by the ___.

workers; capitalists

16. Inventory Investment ___. A) is always positive B) is always negative C) can be either positive or negative D) can be neither positive or negative

C) can be either positive or negative

11. Corporations are controlled by __. A) employees B) bond holders C) common stockholders D) preferred stockholders

C) common stockholders

7. A ___ is a legal person. A) proprietorship B) partnership C) corporation D) business firm

C) corporation

5. A partnership ___. A) must have exactly two owners B) must have more than two owners C) must have more than one owner D) May have more than one owner

C) must have more than one owner

8. Most corporations are ____. A) publicly held B) very large C) very small D) none of the above

C) very small

Theoretically, you would need an investment of about $____ to control a corporation that had $100 million in preferred stock, $50 million in common stock, and $350 million in bonds.

$25million + $1 (just over 1/2 of common stock)

Total investment is found by adding (1) ______; (2) ______; and (3) _____.

(1) inventory (2) investment in plant & equipment & (3) investment in residential housing

The two main disadvantages of incorporating are (1) ____ and (2) ____.

(1)high corporate income taxes (2)cost of incorporating

During severe recessions, our capacity utilization rate falls to around ____ percent.

70%

4. A business firm with one owner is ___. A) a proprietorship B) a partnership C) a corporation D) none of the above

A) a proprietorship

12. The last to be paid off, whether the corporation does well or goes bankrupt, are the ____. A) employees B) bond holders C) common stockholders D) preferred stockholders

A) employees

18. During severe recessions, inventory investment is ___. A) negative B) stable C) fairly high D) very high

A) negative

15. Which of the following is NOT an investment? A) the purchase of 100 shares of IBM B) the construction of a new factory C) the purchase of a new delivery truck D) The purchase of inventory

A) the purchase of 100 shares of IBM

10. A key disadvantage of incorporating is that ___. A) you will have to pay corporate income taxes B) you will have to charge sales tax C) you will have to sell stock D) you will have to reorganize the corporation whenever an officer resigns or dies

A) you will have to pay corporate income taxes

6. A key advantage of a partnership over a proprietorship is ___. A) limited liability B) division of responsibility C) perpetual life of the business firm D) none of the above

B) division of responsibility

3. Which statement is false? A) Education spending is not officially classified as investment spending B) education spending Is officially classified as investment spending C) education spending is classified as a form of consumption spending D) a case could be made to consider education spending has an investment

B) education spending Is officially classified as investment spending

19. Gross investment ____. A) plus depreciation equals net investment B) minus depreciation equals net investment C) plus net investment equals depreciation D) equals net investment minus depreciation

B) minus depreciation equals net investment

2. Which of these is NOT an investment? A) additional inventory B) the building of a county court house C) the building of a shopping mall D) I he building of an automobile assembly line

B) the building of a county court house

9. Corporations collect about ___ percent of all business receipts.. A) 10 B) 32 C) 61 D) 81

D) 81

20. Each of the following might be used to acquire capital EXCEPT ___. A) working more B) consuming less C) borrowing D) consuming more

D) consuming more

1. In the United Stated, investment is done ___. a) entirely by the government B) mostly by the government C) about half by the government and half by private enterprise D) mainly by private enterprise

D) mainly by private enterprise

14. A corporation's capitalization is based in all of the following EXCEPT ___. A) preferred stock B) common stock C) bonds D) sales

D) sales

17. Inventory investment is ____. A) very stable B) fairly stable C) fairly unstable D) very unstable

D) very unstable

13. Ownership of a corporation is based on ____. A) whether you work for the company B) whether you buy from the company C) whether you hold the bonds of the company D) whether you hold stock In the company

D) whether you hold stock In the company

Of the big three spending sectors of GDP, the least stable is ____.

I, investment

31. Which statement is the most accurate? a) In Middle Eastern Islamic countries, the typical partnership consisted of just two members, who pooled their resources for perhaps a single trade mission b) In virtually all countries, partnerships dissolve with the death of a member c) Inheritance laws in Western Europe and in Islamic Middle Eastern countries each have the effect of keeping large fortunes intact. d) The large partnership became the engine of economic growth in the second half of the 19th century throughout Western Europe.

a) In Middle Eastern Islamic countries, the typical partnership consisted of just two members, who pooled their resources for perhaps a single trade mission

30. Statement 1. Inventory computerization has tended to reduce inventory levels. Statement 2. Inventory investment tends to rise during recessions. a) Statement 1 is true and statement 2 is false b) Statement 2 is rue and statement 1 is false c) Both statements are true d) Both statements are false

a) Statement 1 is true and statement 2 is false

21. Karl Marx said that capital is produced by ___. a) the worker b) capitalist c) the government d) money

a) the worker

29. Which statement is the most accurate? a) Almost all corporations are very large b) If you want to be your own boss and don't want to share any of the decision making, the business form that would best suit you is a proprietorship c) It is very expensive to form a corporation d) Most business firms are partnerships

b) If you want to be your own boss and don't want to share any of the decision making, the business form that would best suit you is a proprietorship

24. During bad recessions, investment in plant and equipment will _____. a) be negative b) fall by around 15 to 20 percent c) fall somewhat d) rise

b) fall by around 15 to 20 percent

The creditors of a corporation are mainly its ___.

bondholders

26. Investment will be high when the capacity utilization rate is ___ and the interest rate is ___. a) high; high b) low; low c) high; low d) low; high

c) high; low

22. Which is the least stable? a) investment in plant & equipment b)investment in residential housing c) investment in inventory d) overall investment

c) investment in inventory

23. Business firms invest in plant and equipment during recession years for each of these reasons EXCEPT ___. a) interest rates are lower b) it has been planned years ahead c) it replaces worn-out plant and equipment d) it is needed because capacity may be fully utilized

d) it is needed because capacity may be fully utilized

28. Firms will most likely borrow money for investment when ___. a) interest rates are low b) interest rates are high c) the interest rate is higher than the expected profit rate d) the expected profit rate is higher than the interest rate

d) the expected profit rate is higher than the interest rate

Gross investment - ___= Net investment

depreciation

The expected profit rate is found by dividing _______ by _________.

expected profits by the amount invested

An investment will be undertaken if the expected profit rate is higher than the _____.

interest rate

The least stable form of investments is _____ investment.

inventory

The key advantage of incorporating is ___________.

limited liability

There are about ____ million business firms in the United States.

over 30 million