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Fundamentals of Investments, 8e (Jordan)
Chapter 19 Global Economic Activity and Industry Analysis
1) Which of the following is NOT considered in the first filter or phase of top-down analysis?
A) Domestic spending
B) Fiscal policy
C) Business cycles
D) Monetary Policy
E) Economic indicators
2) The relationship between GDP and market capitalization for the leading economies of the
world is generally ________.
A) weakly related
B) inversely related
C) negatively correlated
D) positively correlated
E) unrelated
3) Which of the following is NOT considered a leading economic indicator?
A) stock prices
B) M2 money supply
C) industrial production
D) interest rate spread
E) consumer expectations index
4) Which of the following is NOT considered a lagging economic indicator?
A) prime rate
B) change in CPI for services
C) industrial production
D) commercial and industrial loans
5) Which one of the following is defined as the market value of goods and services produced
over a period of time?
A) Domestic Market Product (DMP)
B) Gross Domestic Product (GDP)
C) Gross Economic Activity (GEA)
D) Gross Market Value (GMV)
E) Market Value Product (MVP)
6) Which of the following reflects the dollar value of economic output in terms of the current
year?
A) current year GDP
B) real GDP
C) nominal GDP
D) adjusted GDP
E) actual GDP
7) Which of the following reflects the value of economic output adjusted to remove the effects of
inflation?
A) current year GDP
B) real GDP
C) nominal GDP
D) adjusted GDP
E) actual GDP
8) The U.S. makes up approximately what percent of the global equity market capitalization?
A) 20%
B) 25%
C) 30%
D) 35%
E) 40%
9) Which of the following is NOT one of the four stages of the business cycle?
A) boom
B) peak
C) contraction
D) trough
E) expansion
10) Economic metrics that tend to rise and fall in advance of the economy are called ________
indicators.
A) predictive
B) forecast
C) leading
D) coincident
E) cyclical
11) Which of the following is not listed as a cause of increased integration of economies around
the world?
A) increased technology
B) increased international travel
C) improved supply chain logistic
D) reduced trade barriers
E) none of these
12) If the number of Euros required to buy $1 (USD) increases then the Euro has ________
versus the U.S. dollar.
A) depreciated
B) appreciated
C) declined
D) improved
E) increased
13) If the number of Euros required to buy $1 (USD) decreases then the Euro has ________
versus the U.S. dollar.
A) depreciated
B) appreciated
C) declined
D) improved
E) increased
14) The relationship between inflation and real GDP is ________.
A) direct
B) positive
C) negative
D) non-existent
E) inverse
15) In the U.S., what percentage of the GDP is consumer spending?
A) 45%
B) 55%
C) 65%
D) 75%
E) 85%
16) All nonmilitary people employed and unemployed, but seeking employment make up the
________.
A) labor force
B) labor population
C) employable population
D) work force participants
E) employable work force
17) The labor force divided by the nonmilitary working age population equals the ________.
A) work force participation rate
B) employable participation rate
C) labor population participation rate
D) labor force participation rate
E) participating employees rate
18) Which index measures the average prices paid by urban consumers for a basket of consumer
goods and services?
A) Urban Inflation Index (UII)
B) Price Inflation Index (PII)
C) Urban Consumer Index (UCI)
D) Consumer Inflation Index (CII)
E) Consumer Price Index (CPI)
19) Which of the following combinations describes a "goldilocks" scenario?
A) slow income growth, low unemployment and low inflation
B) rapid income growth, high unemployment and low inflation
C) rapid income growth, low unemployment and low inflation
D) rapid income growth, low unemployment and high inflation
E) rapid income growth, high unemployment and high inflation
20) It has been estimated that "substitution effects" underestimate the Consumer Price Index by
approximately how much?
A) 3%
B) 2.5%
C) 1.75%
D) 1.0%
E) 0.5%
21) A common rule of thumb on Wall Street says that the sum of the inflation rate plus the
market price-earnings ratio equals ________.
A) 10
B) 15
C) 20
D) 25
E) 30
22) The power of a "rippling effect" of adding money to the financial system is measured by the
________.
A) ripple ratio
B) money multiplier
C) multiplier ratio
D) money magnifier
E) magnifier ratio
23) The so-called "M1" money supply includes which of the following?
A) currency and checking deposits
B) currency and money markets
C) currency and time deposits
D) currency, time deposits and money markets
E) checking and time deposits
24) Which of the following describes the "M2" Money Supply?
A) M1 plus time deposits, savings accounts and money markets
B) M1 plus time deposits and savings accounts
C) M1 plus time deposits and money markets
D) M1 plus money markets
E) M1 plus checking and time deposits
25) Which of the following is NOT a primary goal of the Federal Reserve?
A) keep inflation in check
B) encourage consumer spending
C) generate full employment
D) moderate the business cycle
E) help achieve long-term economic growth
26) Which of the following interest rates is directly controlled by the Federal Reserve?
A) the fed funds rate
B) the discount rate
C) the prime rate
D) mortgage rates
E) credit card rates
27) The buying and selling of bonds by the Federal Reserve to manage the money supply is
called ________.
A) quantitative easing
B) discount window operations
C) open market operations
D) money supply management
E) Federal Reserve operations
28) Government determination of tax rates and spending policies is called ________.
A) tax policy
B) budgetary policy
C) federal spending policy
D) fiscal policy
E) monetary policy
29) If government expenditures exceed tax revenue the resulting shortfall is termed a ________.
A) budget shortfall
B) taxing deficiency
C) budget deficit
D) revenue shortfall
E) revenue deficiency
30) "PIGS" refers to which 4 countries in Europe?
A) Portugal, Ireland, Greece and Spain
B) Portugal, Ireland, Germany and Switzerland
C) Poland, Ireland, Germany and Sweden
D) Poland, Italy, Greece and Spain
E) Poland, Italy, Greece and Slovenia
31) The interest rate the Federal Reserve charges its member banks on loans is called:
A) Fed Funds Rate
B) Federal Reserve Rate
C) Discount Rate
D) Federal Loan Rate
E) Reserve Loan Rate
32) The short-term rate at which banks lend to each other is called the ________.
A) Fed Funds Rate
B) Federal Reserve Rate
C) Discount Rate
D) Federal Loan Rate
E) Reserve Loan Rate
33) Which sector has a high sensitivity to the business cycle?
A) defensive
B) offensive
C) lagging
D) cyclical
E) leading
34) Which sector has a low sensitivity to the business cycle?
A) defensive
B) offensive
C) lagging
D) cyclical
E) leading
35) Which of the following was the largest sector in the S&P as of April 2012?
A) consumer discretionary
B) energy
C) health care
D) technology
E) financials
36) A breakdown of the S&P 500 into major sectors specifying the relative market weight of
components is called a ________.
A) heat map
B) sector chart
C) component map
D) market capitalization chart
E) sector component map
37) Which one of the following is not one of the elements in the industry life cycle?
A) start-up
B) rapid growth
C) consolidation
D) maturity
E) relative decline
38) Which of the following is NOT one of Michael Porter's Five Forces?
A) threat of new entrants
B) bargaining power of buyers
C) bargaining power of suppliers
D) threat of new technology
E) threat of substitute products
39) The process of moving investments between sectors of the economy over time is called
________.
A) sector stagnation
B) sector selection
C) rotational investing
D) sector exchange
E) sector swapping
