50MC - Spring06 1102H midterm 2 practice MC Multiple Choice...

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Spring06 1102H midterm 2 practice MC Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. When opening a restaurant you may need to buy ovens, freezers, tables, and cash registers. Economists call these expenditures a. capital investment. b. investment in human capital. c. business consumption expenditures. d. None of the above are correct. ____ 2. When a country saves a larger portion of its GDP, it will have a. less investment, and so have more capital and higher productivity. b. less investment, and so have less capital and higher productivity. c. more investment, and so have more capital and higher productivity. d. more investment, and so have less capital and higher productivity. ____ 3. Institutions in the economy that help to match one person's saving with another person's investment are collectively called the a. Federal Reserve system. b. banking system. c. monetary system. d. financial system. ____ 4. A bond is a a. financial intermediary. b. certificate of indebtedness. c. certificate of partial ownership in an enterprise. d. None of the above are correct. ____ 5. A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a a. bond. b. stock. c. mutual fund. d. All of the above are correct. ____ 6. The length of time until a bond matures is called the a. duration. b. term. c. maturity. d. intermediation. ____ 7. On which bond is default most likely? a. a junk bond b. a municipal bond c. a U.S. government bond d. a corporate bond issued by Proctor and Gamble. ____ 8. Which bond would you expect to pay the highest interest rate? a. a bond issued by the U.S. government b. a bond issued by General Motors c. a bond issued by New York State d. a bond issued by a new restaurant chain ____ 9. Compared to bonds, stocks offer the holder
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a. lower risk. b. partial ownership. c. the likelihood of a lower return. d. All of the above are correct. ____ 10. Which of the following statements is most likely to be correct? a. A general, persistent decline in stock prices is a signal that the economy is about to enter a boom period because people will be able to buy stock for less money. b. A general, persistent decline in stock prices is a signal that the economy is about to enter a recession because low stock prices may mean that people are expecting low corporate profits. c. A general, persistent decline in stock prices does not tell us anything about the business cycle because stock prices can fall for many reasons. d. A general, persistent decline in stock prices is a signal that the economy is about to enter a recession because low stock prices mean that corporations have had low profits in the past. ____ 11.
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50MC - Spring06 1102H midterm 2 practice MC Multiple Choice...

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