Chap017 - Chapter 17 Macroeconomic and Industry Analysis...

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Unformatted text preview: Chapter 17 Macroeconomic and Industry Analysis 389 Multiple Choice Questions 1. A top down analysis of a firm starts with ____________. A) the relative value of the firm B) the absolute value of the firm C) the domestic economy D) the global economy E) the industry outlook Answer: D Difficulty: Easy 2. An example of a highly cyclical industry is ________. A) the automobile industry B) the tobacco industry C) the food industry D) A and B E) B and C Answer: A Difficulty: Easy Rationale: Consumer durables, such as automobiles, are highly cyclical as purchases can be delayed until good times. Necessities, low-ticket items, and addictive products are purchased in good times and bad. 3. Demand-side economics is concerned with _______. A) government spending and tax levels B) monetary policy C) fiscal policy D) A and B E) A, B, and C Answer: E Difficulty: Easy Rationale: Demand-side economics is concerned with monetary and fiscal policy (government spending and taxing). Chapter 17 Macroeconomic and Industry Analysis 390 4. The most widely used monetary tool is ___________. A) altering the discount rate B) altering the reserve requirements C) open market operations D) altering marginal tax rates E) none of the above Answer: C Difficulty: Easy Rationale: The Federal Reserve's open market operations are the most widely used and most effective monetary tool for influencing interest rates. 5. The "real", or inflation-adjusted, exchange rate, is A) the balance of trade. B) the budget deficit. C) the purchasing power ratio. D) unimportant to the U. S economy. E) none of the above. Answer: C Difficulty: Easy Rationale: The ratio of one country's purchasing power to another's is called the "real", or inflation adjusted, exchange rate, and is an important measure of the relative costs of domestic versus foreign goods. 6. The "normal" range of price-earnings ratios for the S&P500 Index is A) between 2 and 10. B) between 5 and 15. C) less than 8. D) between 12 and 25 E) greater than 20. Answer: D Difficulty: Moderate Rationale: Stock prices commonly trade at between 12 and 25 times earnings. Chapter 17 Macroeconomic and Industry Analysis 391 7. Monetary policy is determined by A) government budget decisions. B) presidential mandates. C) the board of Governors of the Federal Reserve System. D) congressional actions. E) none of the above Answer: C Difficulty: Easy Rationale: The Board of Governors of the Federal Reserve System determines monetary policy through open market operations, changes in the discount rate and reserve requirement adjustments. 8. A trough is ________. A) a transition from an expansion in the business cycle to the start of a contraction B) a transition from a contraction in the business cycle to the start of an expansion C) a depression that lasts more than three years....
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This note was uploaded on 10/02/2011 for the course ECON 136 taught by Professor Szeidl during the Spring '08 term at University of California, Berkeley.

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Chap017 - Chapter 17 Macroeconomic and Industry Analysis...

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