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49. Which of the following is the rate at which the general level of prices for goods and
services is rising?
50. An analyst starts by examining the broad economic environment and then considers the
implications of the economy on the industry in which the firm operates. Finally, the firm's position
within the industry is examined. This is called __________ analysis.
51. Assume that the Federal Reserve increases the money supply. This will cause:
I. Interest rates to decrease
II. Consumption and investment to decrease
III. Inflation to fall
52. The discount rate is the ________.
53. If the currency of your country is depreciating, this should __________ exports and
__________ imports.
54. If interest rates increase, business investment expenditures are likely to __________ and
consumer durable expenditures are likely to _________.
55. Increases in the money supply will cause demand for investment and consumption goods
to __________ in the short run and may cause prices to __________ in the long run.
56. The nominal interest rate is 6%. The inflation rate is 3%. The exact real interest rate must
be _________.
57. The nominal interest rate is 10%. The real interest rate is 4%. The inflation rate must be
_________.
58. Order the following stages in the industry life cycle from the earliest to latest to occur
after the start-up phase:
I. Maturity
II. Relative decline
III. Consolidation
59. An investment strategy that entails shifting the portfolio into industry sectors that are
expected to outperform others based on macroeconomic forecasts is termed ______________.
60. Firm A produces gadgets. The price of gadgets is $2 each. Firm A has total fixed costs of
$1,000,000 and variable costs of $1 per gadget. The corporate tax rate is 40%. If the economy is
strong, the firm will sell 2,000,000 gadgets. If the economy enters a recession, the firm will sell
only half as many gadgets. If the economy enters a recession, the after-tax profit of firm A will be
_________.
61. Firm B produce gadgets. The price of gadgets is $2 each. Firm B has total fixed costs of
$300,000 and variable costs of $1.40 per gadget. The corporate tax rate is 30%. If the economy is
strong, the firm will sell 2,000,000 gadgets. If the economy enters a recession, the firm will sell
only half as many gadgets. If the economy is strong, the after-tax profit of firm B will be
_________.
62. The fed funds rate is the __________.
63. Firm B produce gadgets. The price of gadgets is $2 each. Firm B has total fixed costs of
$300,000 and variable costs of $1.40 per gadget. The corporate tax rate is 40%. What is the
breakeven number of gadgets B must sell to make a zero after-tax profit?
64. The goal of supply-side policies is to _______.
65. An industry analysis for manufacturers of a small personal care gadget observed the
following characteristics:
1. Industry sales have grown at 15%-20% per year in recent years and are expected to grow at
10%-15% per year over the next 3 years, still well above the economic growth rate.
2. Some U.S. manufacturers are attempting to enter fast-growing non-U.S. markets, which remain
largely unexploited.
3. Some manufacturers have created a new niche in the industry by selling directly to customers
through mail order. Sales for this industry segment are growing at 40% per year.
4. The current penetration rate in the United States is 60% of households and will be difficult to
increase.
5. Manufacturers compete fiercely on the basis of price, and price wars within the industry are
common.
6. Some manufacturers are able to develop new, unexploited niche markets in the United States
based on company reputation, quality, and service.
7. Several manufacturers have recently merged, and it is expected that consolidation in the
industry will increase.
8. New manufacturers continue to enter the market.
Characteristics 4 and 5 would indicate that the industry is in the _________ stage.
66. An industry analysis for manufacturers of a small personal care gadget observed the
following characteristics:
1. Industry sales have grown at 15%-20% per year in recent years and are expected to grow at
10%-15% per year over the next 3 years, still well above the economic growth rate.
2. Some U.S. manufacturers are attempting to enter fast-growing non-U.S. markets, which remain
largely unexploited.
3. Some manufacturers have created a new niche in the industry by selling directly to customers
through mail order. Sales for this industry segment are growing at 40% per year.
4. The current penetration rate in the United States is 60% of households and will be difficult to
increase.
5. Manufacturers compete fiercely on the basis of price, and price wars within the industry are
common.
6. Some manufacturers are able to develop new, unexploited niche markets in the United States
based on company reputation, quality, and service.
7. Several manufacturers have recently merged, and it is expected that consolidation in the
industry will increase.
8. New manufacturers continue to enter the market.
Characteristics _______ would be typical of an industry that is in the start-up stage.
67. An industry analysis for manufacturers of a small personal care gadget observed the
following characteristics:
1. Industry sales have grown at 15%-20% per year in recent years and are expected to grow at
10%-15% per year over the next 3 years, still well above the economic growth rate.
2. Some U.S. manufacturers are attempting to enter fast-growing non-U.S. markets, which remain
largely unexploited.
3. Some manufacturers have created a new niche in the industry by selling directly to customers
through mail order. Sales for this industry segment are growing at 40% per year.
4. The current penetration rate in the United States is 60% of households and will be difficult to
increase.
5. Manufacturers compete fiercely on the basis of price, and price wars within the industry are
common.
6. Some manufacturers are able to develop new, unexploited niche markets in the United States
based on company reputation, quality, and service.
7. Several manufacturers have recently merged, and it is expected that consolidation in the
industry will increase.
8. New manufacturers continue to enter the market.
Characteristics ____ would be typical of an industry that is in the consolidation stage.
