Chapter 11 The Macroeconomic Environment for Investment
Decisions
TRUE/FALSE
that can be forecasted with accuracy.
States.
pays when it borrows funds.
securities by the Federal Reserve.
coins, and checking accounts.
excludes savings accounts in commercial banks.
commercial banks’ capacity to lend.
required return for common stock.
economic activity.
on consumer goods, government spending, and investing in
stocks and bonds.
other when they borrow reserves.
through their impact on corporate earnings.
suggests that investors should sell the stocks of natural
resource companies (e.g., gold and silver).
periods.
anticipation of inflation.
implies that the Fed is buying securities.
MULTIPLE CHOICE
d 1. The economic goals of the Federal Reserve include
1. prosperity
2. full employment
3. stable prices
a. 1 and 2
b. 1 and 3
c. 2 and 3
d. all of the above
supply, it
a. sells securities
b. buys securities
c. runs a deficit
d. runs a surplus
supply, it may
a. sell securities and raise the targeted federal
funds rate
b. sell securities and lower the targeted federal
funds rate
c. buy securities and raise the targeted federal
funds rate
d. buy securities and lower the targeted federal
funds rate
1. affecting investors’ required return
2. increasing the federal deficit
3. affecting firms’ capacity to generate earnings
a. 1 and 2
b. 1 and 3
c. 2 and 3
d. all of the above
1. the general public buying government bonds
2. commercial banks buying treasury bills
3. the Federal Reserve selling securities
a. 1 and 2
b. 1 and 3
c. 2 and 3
d. all of the above
a. M1
b. M2
c. M3
d. M4
a. expenditures
b. taxation
c. the money supply
d. debt management
funds rate,
a. the discount rate rises
b. liquidity in the banking system is increased
c. securities prices fall
d. required reserves are decreased
investor should
a. buy bonds
b. anticipate higher interest rates
c. avoid real estate investments
d. sell stocks of gold companies
a. rising unemployment
b. declining unemployment
c. rising prices
d. falling prices
a. declining unemployment
b. rising unemployment
c. falling prices
d. rising prices
a. rising stock prices
b. rising prices of consumer goods
c. declining interest rates
d. rising confidence in the dollar
a. initial claims for unemployment insurance
b. building permits for new home construction
c. changes in manufacturers’ unfilled orders for
durable good
d. the level of unemployment
a. increased inflation
b. increase in interest rates
c. an easy monetary policy
d. a tight monetary policy
is to
a. sell stocks short
b. buy real estate
c. acquire ETFs specializing in commodities
d. hoard money
a. higher interest rates
b. a decrease in the money supply
c. an increase in the rate of inflation
d. the Federal Reserve buying securities