Unit 8 - 65

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

A) Automotive industry

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) Defensive stocks C) Aggressive growth stocks D) Corporate bonds

B) Defensive stocks

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) common stock D) commodities

B) U.S. Treasury bonds

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 lagging indicator B) a leading indicator C) a coincident indicator D) a GDP deflator

B) a leading indicator

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

C) a single issuer over varying maturities

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) a normal yield curve B) a positive yield curve C) an inverted yield curve D) a flat yield curve

D) a flat yield curve

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) Internal Revenue Service D) president

D) president

All of the following are tools that may be employed by the Federal Reserve in an effort to control the economy EXCEPT A) the reserve requirements B) the discount rate C) open market operations buying and selling Treasury securities D) the prime rate

D) the prime rate

A recession is defined as a drop in GDP for: A) six consecutive quarters. B) three consecutive quarters. C) four consecutive quarters. D) two consecutive quarters.

D) two consecutive quarters.

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

A) a positive yield curve

A decrease in the value of the monetary unit is just a way of defining A) a likely decrease in exports B) inflation C) a decrease in consumer demand D) deflation

B) inflation

When the value of the U.S. dollar decreases, A) domestic manufacturers will likely increase their exports B) foreign manufacturers will likely export more to the United States C) domestic manufacturers will likely increase their imports D) domestic manufactures will likely not be affected

A) domestic manufacturers will likely increase their exports

Proponents of the concept of inflation inertia believe that A) prices will rise rapidly and then begin to contract B) prices will rise slowly and then begin to increase at a faster rate C) the rate of inflation will parallel the CPI D) prices will remain the same for a protracted period of time

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

To stimulate a sluggish economy using fiscal policy measures, policymakers would A) increase income taxes B) reduce income taxes C) increase the money supply D) reduce the money supply

B) reduce income taxes