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Principles of Finance, 6e
Besley/Brigham
Chapter 17
Cengage Learning Testing, Powered by Cognero
Page 21
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
GDP
42. When the Federal Reserve wants to slow down the economy that is growing at an unsustainable rate, the Federal
reserve can
a.
decrease interest rates by increasing the money supply.
b.
increase interest rates by increasing the money supply.
c.
increase interest rates by decreasing the money supply.
d.
decrease interest rates by decreasing the money supply.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
Monetary Policy
43. Increased deficit spending by the government is likely to result in
a.
higher than normal interest rates.
b.
no change in the interest rate.
c.
lower than normal interest rates.
d.
lower expected inflation.
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
Fiscal Policy
44. Generally speaking, the P/E multiples are higher for firms with ____ expected growth rates and ____ expected
required rates of return.
a.
higher; lower
b.
lower; higher
c.
lower; lower
d.
higher; higher
ANSWER:
a
POINTS:
1
Principles of Finance, 6e
Besley/Brigham
Chapter 17
Cengage Learning Testing, Powered by Cognero
Page 26
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
Fundamental Analysis
58. Economists define a recession as a contraction in the economy in at least three out of the last five quarters.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
Economic Analysis
59. When the economy is in a recession, by definition, all sectors of the economy must be experiencing a downturn, or
contraction.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
Economic Analysis
60. When economists measure the aggregate economy and say that it is either expanding or contracting, they are
indicating the direction of the current business cycle.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Principles of Finance, 6e
Besley/Brigham
Chapter 17
Cengage Learning Testing, Powered by Cognero
Page 28
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
Monetary Policy
65. Generally, composite indexes rather than individual indexes are used to indicate the general movement of the
economy because combinations of multiple measures provide better gauges of the general pattern than individual
measures that contain spurious movements that are difficult to interpret.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
Economic Indicators
66. When there is deficit spending in the United States, the amount of goods and services that is imported exceed the
amount that is exported.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
Fiscal Policy
67. The fiscal policy of the United States is dominated by deficit spending, which means the government spends more
than it collects in taxes.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Principles of Finance, 6e
Besley/Brigham
Chapter 17
Cengage Learning Testing, Powered by Cognero
Page 30
71. Individuals who prefer investments that offer current income (i.e., dividends) probably should purchase stocks that are
in the mature stage of their industry life cycle. Such investors most likely would avoid companies that are in the
introductory stage of their life cycle.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
Industry Life Cycle
72. The industry life cycle follows various stages of growth with respect to the product of competitive conditions within
the industry.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
Industry Life Cycle
73. Even though industries might be at different stages in their industry life cycle and the progress of their paces vary, all
industries will eventually reach the mature stage.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
Industry Life Cycle
74. Industries comprised of companies that tend to be directly related to business cycles are generally referred to as
defensive industries.
a.
True
b.
False
Principles of Finance, 6e
Besley/Brigham
Chapter 17
Cengage Learning Testing, Powered by Cognero
Page 31
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
Industry Characteristics
75. Industries that are comprised of companies that tend to be directly related to business cycles are generally referred to
as cyclical industries.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
Industry Characteristics
76. The dividend discount model (DDM) can only be used to value a company's stock if it is expected that the company
will pay a dividend that grows at a constant rate in the future.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-09 - Investments
Time Estimate-a - 5 min.
TOPICS:
Stock Valuation Techniques
77. An investor who uses the P/E ratio approach to value a firm's common stock would simply multiply the most recently
reported earnings per share (EPS) by the current dividend per share to determine the value.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
