Macroeconomic and industry Analysis
1. A top down analysis of a firm starts with ____________. D. the global economy
2. An example of a highly cyclical industry is ________. A. the automobile industry
3. Demand-side economics is concerned with _______. A. government spending and tax levels B. monetary policy C. fiscal policy E. A, B, and C
4. The most widely used monetary tool is ___________. C. open market operations
5. The \ C. the purchasing power ratio.
6. The \ D. between 12 and 25
7. Monetary policy is determined by
C. the board of Governors of the Federal Reserve System. 8. A trough is ________.
B. a transition from a contraction in the business cycle to the start of an expansion
9. A peak is ________.
A. a transition from an expansion in the business cycle to the start of a contraction
10. If the economy is growing, firms with high operating leverage will experience __________.
A. higher increases in profits than firms with low operating leverage. 11. If the economy is shrinking, firms with high operating leverage will experience __________.
A. higher decreases in profits than firms with low operating leverage. 12. If the economy is growing, firms with low operating leverage will experience __________.
C. smaller increases in profits than firms with high operating leverage. 13. If the economy is shrinking, firms with low operating leverage will experience __________.
C. smaller decreases in profits than firms with high operating leverage. 14. Industrial production refers to _________. C. the total manufacturing output in the economy. 15. GDP refers to _________.
D. the total production of goods and services in the economy
16. A rapidly growing GDP indicates a(n) ______ economy with ______ opportunity for a firm to increase sales. D. expanding; ample
17. A declining GDP indicates a(n) ______ economy with ______ opportunity for a firm to increase sales. A. stagnant; little
18. The average duration of unemployment and changes in the consumer price index for services are _________. C. lagging economic indicators
19. A firm in an industry that is very sensitive to the business cycle will likely have a stock beta ___________. A. greater than
20. If the economy were going into a recession, an attractive industry to invest in would be the ________ industry. B. medical services
21. The stock price index and contracts and new orders for nondefense capital goods are
A. leading economic indicators.
22. A firm in the early stages of the industry life cycle will likely have ________. B. high risk. C. rapid growth E. B and C
23. Assume the . government was to decide to increase the budget deficit. This action will most likely cause __________ to increase A. interest rates B. government borrowing
D. both A and B
24. Assume the . government was to decide to decrease the budget deficit. This action will most likely cause __________ to decrease A. interest rates B. government borrowing D. both A and B
25. Assume that the Federal Reserve decreases the money supply. This action will cause ________ to decrease. C. investment in the economy
26. If the currency of your country is depreciating, the result should be to ______ exports and to _______ imports. B. stimulate, discourage
27. If the currency of your country is appreciating, the result should be to ______ exports and to _______ imports. C. discourage, stimulate
28. Increases in the money supply will cause demand for investment and
consumption goods to _______ in the short run and cause prices to ________ in the long run. A. increase, increase
29. The North American Industry Classification System (NAICS) A. are for firms that operate in the NAFTA region. B. group firms by industry. D. A and B.
30. If interest rates increase, business investment expenditures are likely to ______ and consumer durable expenditures are likely to _________. D. decrease, decrease
31. Fiscal policy generally has a _______ direct impact than monetary policy on the economy, and the formulation and implementation of fiscal policy is ______ than that of monetary policy. B. more, slower
32. Fiscal policy is difficult to implement quickly because A. it requires political negotiations.
B. much of government spending is nondiscretionary and cannot be changed. D. A and B. 33. Inflation
A. is the rate at which the general level of prices is increasing. B. rates are high when the economy is considered to be \D. A and B.
Two firms, A and B, both produce widgets. The price of widgets is $1 each. Firm A has total fixed costs of $500,000 and variable costs of 50 cents per widget. Firm B has total fixed costs of $240,000 and variable costs of 75 cents per widget. The corporate tax rate is 40%. If the economy is strong, each firm will sell 1,200,000 widgets. If the economy enters a recession, each firm will sell 1,100,000 widgets.
34. If the economy enters a recession, the after-tax profit of Firm A will be ________. C. $30,000
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