Series 66 Chapter 6

When discussing employment and production, which of the following industries are typically more affected by a recession?

Capital goods and consumer durable goods *Primarily b/c they are larger items, last for a longer period, and are somewhat discretionary

During what stage of the business cycle do interest rates rise?

Expansion

Cyclical

Follow the cycle

Defensive Investments

Food company stocks and utilities. Also, pharmaceuticals and tobacco. (Nondurable consumer goods) *Defensive investments are those that tend to hold up well in economic downturns.

Which of the statements below best describes why a normal yield curve is positively sloped?

Investors demand higher interest when lending their money for longer periods. *When the yield curve is positively sloped (and thus normal), long-term bonds carry higher interest rates than short-term bonds of the same quality.

Contractions

Tend to be characterized by rising inventories due to a lack of consumer demand.

GDP for the US is composed of

The GDP is comprised of all consumer goods, capital goods, services produced in the United States, and net U.S. exports (exports minus imports).

Countercyclical

Those whose prices tend to move in the opposite direction of the overall economy. *Historically, the price of precious metals, especially gold (and stock in gold-mining companies), moves up when the economy enters the contraction phase and moves in the reverse direction during expansion.

The economic phase in which unemployment increases and businesses operate at their lowest capacity levels?

Trough