ECO102

MacroeconomicsLecture 8Chapter 30 Review Questions

1ECO201 Macroeconomics

Chapter 30 Review Questions

2

ECO102 Macroeconomics

Chapter 30 Review Questions

3

1) A stock isA) a certificate that certifies ownership of a certain portion of a company.B) document verifying a loan to a com-pany.C) a promise of capital gains to its owner.D) a retained earning of a corporation.

4

1) A stock isA) a certificate that certifies ownership of a certain portion of a company.B) document verifying a loan to a company.C) a promise of capital gains to its owner.D) a retained earning of a corporation.

5

2) A bond isA) a share of ownership in a company.B) a document that formally promises to repay a loan.C) a promise to pay a dividend. D) a non-contingent payment.

6

2) A bond isA) a share of ownership in a company.B) a document that formally promises to repay a loan.C) a promise to pay a dividend. D) a non-contingent payment.

7

3) Firms can finance capital spending by doing all of the following EXCEPTA) selling stock in the company.B) issuing bonds.C) borrowing from a bank.D) paying dividends.

8

3) Firms can finance capital spending by doing all of the following EXCEPTA) selling stock in the company.B) issuing bonds.C) borrowing from a bank.D) paying dividends.

9

4) When a firm issues new shares of stockA) it increases its debt load.B) it does not add to its debt.C) it must buy back existing shares of stock in return.D) it lessens the relative value of its net worth.

10

4) When a firm issues new shares of stockA) it increases its debt load.B) it does not add to its debt.C) it must buy back existing shares of stock in return.D) it lessens the relative value of its net worth.

11

5) If the risk associated with a company goes up, you would expect the price of its stock toA) rise.B) fall.C) be unaffected.D) fall to zero.

12

5) If the risk associated with a company goes up, you would expect the price of its stock toA) rise.B) fall.C) be unaffected.D) fall to zero.

13

6) If the expected future earnings of a company goes up, you would expect the price of its stock toA) rise.B) fall.C) be unaffected.D) fall to zero.

14

6) If the expected future earnings of a company goes up, you would expect the price of its stock toA) rise.B) fall.C) be unaffected.D) fall to zero.

15

7) If the interest rate falls, you would ex-pect the price of any stock toA) rise.B) fall.C) be unaffected.D) fall to zero.

16

7) If the interest rate falls, you would ex-pect the price of any stock toA) rise.B) fall.C) be unaffected.D) fall to zero.

17

8) DividendsA) must be paid annually.B) are a return on the money risked on a share of stock.C) are set by the Securities and Ex-change commission.D) are guaranteed.

18

8) DividendsA) must be paid annually.B) are a return on the money risked on a share of stock.C) are set by the Securities and Exchange commission.D) are guaranteed.

19

9) Fractional ownership of a firm is repre-sented byA) capital gains.B) retained earnings.C) a corporate bond.D) a share of stock.

20

9) Fractional ownership of a firm is repre-sented byA) capital gains.B) retained earnings.C) a corporate bond.D) a share of stock.

21

13) A capital gain is A) when you can sell an asset for more than you paid for it.B) when you increase the plant and equip-ment you own.C) when your dividends rise.D) when your coupon payment rises.

22

13) A capital gain is A) when you can sell an asset for more than you paid for it.B) when you increase the plant and equip-ment you own.C) when your dividends rise.D) when your coupon payment rises.

23

14) The Standard and Poor's 500 index is

A) an index of a basket of consumer good pur-chased by the typical consumer.

B) an index based on the stock prices of 30 actively traded large companies.

C) an index based on the 500 largest firms traded in the three biggest stock markets.

D) an index of 5,000 companies traded on the na-tional association of securities dealers automatic quotation system.

24

14) The Standard and Poor's 500 index is A) an index of a basket of consumer good purchased by the typical consumer.B) an index based on the stock prices of 30 actively traded large companies.C) an index based on the 500 largest firms traded in the three biggest stock markets.D) an index of 5,000 companies traded on the na-tional association of securities dealers automatic quo-

25

15) An index based on 30 actively traded large companies on the New York Stock Exchange is theA) Dow Jones Industrial Average.B) NASDAQ.C) Standard and Poor's 500 index.D) Blue Chip index.

26

15) An index based on 30 actively traded large companies on the New York Stock Exchange is theA) Dow Jones Industrial Average.B) NASDAQ.C) Standard and Poor's 500 index.D) Blue Chip index.

27

16) The owners of a company are it'sA) bond holders.B) employees.C) stockholders.D) A and C

28

16) The owners of a company are it'sA) bond holders.B) employees.C) stockholders.D) A and C

29

17) Which of the following chances has the big-gest expected return?A) a 100% chance of getting $1,000B) a 50% chance of winning $2,000 and a 50% chance of winning $0C) a 50% chance of winning $2,000, 25% chance of winning $4,000 and a 25% chance of losing $4,000D) All of the above have the same expected re-turn.

30

17) Which of the following chances has the biggest expected return?

A) a 100% chance of getting $1,000

B) a 50% chance of winning $2,000 and a 50% chance of winning $0

C) a 50% chance of winning $2,000, 25% chance of winning $4,000 and a 25% chance of losing $4,000

D) All of the above have the same expected return.

31

18) If interest rates are positive, which of the following has the lowest current value?A) $350 nowB) $350 a year from nowC) $350 two years from nowD) All of the above have the same current value.

32

18) If interest rates are positive, which of the following has the lowest current value?A) $350 nowB) $350 a year from nowC) $350 two years from nowD) All of the above have the same current value.

33

19) The time it takes to see if that there has been a shock to the economy isA) a recognition lag.B) an implementation lag.C) a response lag.D) none of the above

34

19) The time it takes to see if that there has been a shock to the economy isA) a recognition lag.B) an implementation lag.C) a response lag.D) none of the above

35

20) The time it takes the Central Bank or Congress to change economic policy is A) a recognition lag.B) an implementation lag.C) a response lag.D) none of the above

36

20) The time it takes the Central Bank or Congress to change economic policy is A) a recognition lag.B) an implementation lag.C) a response lag.D) none of the above

37

21) The time it takes for a new economic policy to affect behavior in the economy isA) a recognition lag.B) an implementation lag.C) a response lag.D) none of the above

38

21) The time it takes for a new economic policy to affect behavior in the economy isA) a recognition lag.B) an implementation lag.C) a response lag.D) none of the above

39

22) If the economy is actu-ally at Point C but policy makers think that it is still at Point B, this is an exam-ple of

A) economic policies inef-fectiveness.

B) recognition lag.

C) implementation lag.

D) response lag.

40

22) If the economy is actu-ally at Point C but policy makers think that it is still at Point B, this is an exam-ple of

A) economic policies inef-fectiveness.

B) recognition lag.

C) implementation lag.

D) response lag.

41

23) If the government spending multiplier were 3.5, a $2 billion decrease in govern-ment spending would lower GDP byA) $70 billion after one year.B) $2 billion after two years.C) $1.5 billion after one year.D) $7 billion after one year.

42

23) If the government spending multiplier were 3.5, a $2 billion decrease in govern-ment spending would lower GDP byA) $70 billion after one year.B) $2 billion after two years.C) $1.5 billion after one year.D) $7 billion after one year.

43

24) In general, fiscal policy has a longer ________ lag than monetary policy but shorter ________ lag.A) recognition; responseB) implementation; recognitionC) implementation; responseD) response; implementation

44

24) In general, fiscal policy has a longer ________ lag than monetary policy but shorter ________ lag.A) recognition; responseB) implementation; recognitionC) implementation; responseD) response; implementation

45

25) During periods of slow growth, the Central Bank will likely

A) increase the money supply to increase interest rates.

B) increase the money supply to decrease interest rates.

C) decrease the money supply to increase interest rates.

D) decrease the money supply to decrease interest rates.

46

25) During periods of slow growth, the Central Bank will likely

A) increase the money supply to increase interest rates.

B) increase the money supply to decrease interest rates.

C) decrease the money supply to increase interest rates.

D) decrease the money supply to decrease interest rates.

47

26) If Turkey continues to run large structural deficits year after year, the government will have toA) borrow money to finance them.B) also run a trade deficit.C) raise interest rates to prevent the deflation that accompanies the deficits.D) deregulate financial institutions to accom-modate the deficits.

48

26) If Turkey continues to run large structural deficits year after year, the government will have toA) borrow money to finance them.B) also run a trade deficit.C) raise interest rates to prevent the deflation that accompanies the deficits.D) deregulate financial institutions to accommo-date the deficits.

49

27) The way the Turkish government bor-rows money to finance deficits is byA) selling shares of stock in the govern-ment.B) the Turkish Treasury selling bills and bonds.C) purchasing foreign assets.D) lowering interest rates.

50

27) The way the Turkish government bor-rows money to finance deficits is byA) selling shares of stock in the government.B) the Turkish Treasury selling bills and bonds.C) purchasing foreign assets.D) lowering interest rates.

51

28) The economic impact of automatic stabilizers during ________ periods is to moderate growth.A) deflationaryB) contractionaryC) expansionaryD) recessionary

52

28) The economic impact of automatic stabilizers during ________ periods is to moderate growth.A) deflationaryB) contractionaryC) expansionaryD) recessionary

53

29) Government spending rising during a recession is an example ofA) an automatic destabilizer.B) an automatic stabilizer.C) discretionary economic policy.D) policy lags.

54

29) Government spending rising during a recession is an example ofA) an automatic destabilizer.B) an automatic stabilizer.C) discretionary economic policy.D) policy lags.

55

30) Decreasing taxes during a recession is an example ofA) an automatic destabilizer.B) an automatic stabilizer.C) discretionary economic policy.D) policy lags.

56

30) Decreasing taxes during a recession is an example ofA) an automatic destabilizer.B) an automatic stabilizer.C) discretionary economic policy.D) policy lags.