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LEG 320 Week 2 Quiz – Strayer NEW

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CHAPTER 2

JURISDICTION

MULTIPLE CHOICE

1. As compared to the power of the states to enact criminal laws,

the federal government has identical authority

the federal government has no authority

the federal government has more authority

the federal government has less authority

2. In U.S. v. Lopez, the U.S. Supreme Court held that the federal law controlling guns in public schools was

a valid exercise of Congressional power to regulate commerce

beyond the power of Congress

a violation of due process

a valid exercise of Congressional power to regulate public schools

3. Under what system do the states have the primary responsibility of maintaining public order and safety within each state?

the American system of federalism

the American system of dualism

the American system of constitutionalism

the American system of commercialism

4. What gives the federal government power to regulate actions by use of criminal laws only if the actions involve or affect interstate commerce?

The Commerce Clause

International conventions

The federal domain

United States Treaties

5. Which of the following is not part of the federal domain?

all of these are part of the federal domain

Puerto Rico

sea approaches to the United States

air approaches to the United States

6. What law permits federal agencies to assist in locating state fugitives who may have fled from one state to another?

Unlawful Flight Statute

Federal Kidnapping

Interstate Transportation of Stolen Motor Vehicles

Uttering of U.S. Treasury Checks

7. What term means to surrender an accused criminal under the provisions of a treaty or statute by one authority to another having jurisdiction?

extradition

jurisdiction

posse comitatus

martial law

8. What is the name of an agreement between nations on a specific subject, such as piracy at sea?

United Nations Convention

United Nations Contract

United Nations Coercion

United Nations Comitatus

9. Where does the International Criminal Court sit?

The Hague

The United Nations

Washington DC

Rome

10. The process by which a person who has fled is forcibly brought back to the jurisdiction of the court is called

transportation

extradition

mandatory venue

compulsive jurisdiction

11. According to the Tokyo Convention Act of 1967, any nation may try persons for what crime even if no acts are committed within that country’s boundary or territorial waters?

terrorism

murder

treason

piracy

12. In 1983, the United States claimed sovereignty over waters extending how many nautical miles from the United States and its possessions?

50 nautical miles

100 nautical miles

200 nautical miles

400 nautical miles

13. International criminal law is also known as offenses against the

world

planet

law of nations

United Nations

14. The International Criminal Court at The Hague has the power to prosecute people accused of

murder

all violent crimes

offenses which occur in international waters

war crimes

15. Which of the following is one of the crimes the federal Mann Act addresses?

extortion

interstate prostitution

kidnapping

possession of stolen property

16. What is the name of the federal act that incorporates the state criminal law of the state surrounding the federal enclave as the law of the enclave if there is no relevant federal statute?

Incorporated Crimes Act

Included Crimes Act

Assimilative Crimes Act

Autonomous Crimes Act

17. Military installations and other federally owned and controlled lands within the boundaries of a state are called federal

islands

territories

protectorates

enclaves

18. Final authority on the scope of Indian tribal jurisdiction is held by

each individual tribe

the American Congress of Indian Tribes

Congress

the President

19. How many Indian tribes does the U.S. currently recognize with some attributes of sovereignty?

120

280

310

409

20. What is the name of jurisdiction of the United States over actions within territorial waters of the U.S., on U.S. ships, or stateless vessels on the high seas?

Maritime jurisdiction

Vessel jurisdiction

High Seas jurisdiction

Oceanic jurisdiction

21. International conventions and treaties between nations can confer power to what entity to make criminal laws?

the Federal Government

Indian Tribal Courts

Military Courts

individual states within the United States

22. Because the states have the primary responsibility to maintain public order and security in their state, they have what kind of authority to create criminal law under the police power of each state?

broad

narrow

ultimate

unlimited

23. Indian tribes are generally dependent upon the federal

Bureau of Indian Affairs

Indian Lands Commission

Native American Bureau

Sovereignty Commission

24. Persons in U.S. military service are subject to military jurisdiction and the Uniform

Military Criminal code

Penal Code

Code of Military Justice

Military Penal Law

25. Should a member of the U.S. military commit a crime off-base, jurisdiction will be with

the state

U.S. District Court

military court

United Nations

26. If a member of the U.S. military serving in another country commits an offense while off duty and off base, jurisdiction will be

only in that country

only in military court

only in the Supreme Court

with either the military or that country

27. What federal act forbids the use of federal military forces to enforce civilian laws unless there is other constitutional or congressional authorization?

Martial Law

Military Law

Posse Comitatus

Martial Jurisdiction

28. The U.S. Supreme Court stated that the term “martial law”

has no precise meaning

is clearly defined in common law

is clearly defined by the military

is clearly defined by the President

29. People who commit crimes on federal enclaves can be tried before

the state court

a federal court

tribal court

the Supreme Court

30. The federal government does not have inherent police power to create criminal law and is limited to the powers granted to the federal government in the

U.S. Constitution

Great Writ

Declaration of Independence

U.S. Supreme Court Guidelines

TRUE/FALSE

1. Under the American system of federalism, the congress has the primary responsibility of maintaining public order and safety within each state.

2. The Unlawful Flight Statute permits federal agencies to assist in locating state fugitives who may have fled from one state to another.

3. Federal enclaves are federally owned and controlled lands.

4. The Federal Government owns and controls up to 1/3 of all of the land in the United States in the form of territories and federal enclaves.

5. Under international law, more than one country could have jurisdiction over the same crime.

6. The International Criminal Court is the world’s first permanent war crimes court.

7. The federal government has no jurisdiction over offenses involving interstate commerce.

8. Tribal courts have no power to exercise criminal jurisdiction over Indians who are not members of that tribe.

9. Military courts have jurisdiction over members of the Armed Forces who commit crimes while off-base and off-duty.

10. Americans who commit crimes in foreign countries are subject to prosecution before U.S. or military courts, but not foreign courts.

41-42

COMPLETION

1. The government may pass laws only in situations authorized by the Constitution.

2. Americans who commit crimes in countries are subject to prosecution before foreign courts, whether they are military personnel or tourists.

3. Federal enclaves are federally owned and controlled .

4. The procedure by which a person who has fled to avoid criminal prosecution is brought back to the jurisdiction is called ___________.

5. Because of the statutes giving many nations jurisdictions over crimes, situations could exist in which a number of nations have _________ jurisdiction.

6. The United States claims jurisdiction extending __________ nautical miles beyond its shores.

7. When the crew of a ship or aircraft seizes control against lawful authority, this is the offense of __________.

8. Crimes committed in places beyond the of any state may be prosecuted on the federal level.

9. Persons in U.S. military service become subject to the Uniform Code of Military ______________.

10. Indian courts have jurisdiction for crimes punished for not more than one-year imprisonment and/or a $5,000 fine (25 U.S.C. § 1302 (7)).

CHAPTER 3

ESSENTIAL ELEMENTS OF A CRIME

MULTIPLE CHOICE

1. The Latin term actus reus means

strict liability

guilty act

guilty mind

elements of a crime

2. The Latin term mens rea refers to

strict liability

guilty act

guilty mind

elements of a crime

3. According to the Model Penal Code, a person who consciously disregards a substantial and unjustifiable risk that the material element exists or will result from his conduct, acts

purposely

knowingly

recklessly

negligently

4. According to the Model Penal Code, how is a person acting, with respect to a material element of an offense, when he should be aware of a substantial and unjustifiable risk that the material element exists or will result from his conduct?

purposely

knowingly

recklessly

negligently

5. Thinking of committing a crime without performing a criminal act is

never a crime

a crime in many states

a strict liability crime

difficult to prove beyond a reasonable doubt

6. Most crimes require the concurrence of which of the following?

act and proximate cause

guilty act and guilty mind

guilty mind and causation

act and omission

7. To obtain a conviction, the prosecution has the burden of proving every element of the crime

by a preponderance of the evidence

by clear and convincing evidence

beyond a reasonable doubt

beyond a shadow of a doubt

8. Which of the following terms refers to an individual’s mental state?

mens rea

actus reus

scienter

proximate cause

9. To find a defendant guilty of the crime of receiving stolen property, most states

do not require scienter

require proof the defendant knew the property was stolen

require proof the defendant committed the theft

require proof the defendant had a motive

10. In criminal law, motive refers to

criminal intent

the defendant’s mental state while committing the crime

the reason the defendant committed the crime

a necessary element of every crime

11. In a criminal trial, motive

is always relevant evidence

alone, is sufficient evidence for a conviction

is required for conviction

is the same as criminal intent

12. A strict liability offense is one without

motive

proximate cause

criminal intent

a guilty act

13. Strict liability statutes

generally provide for harsh penalties

do not require the prosecutor to prove criminal intent

require a particular state of mind at the time of the act

are considered true crimes

14. Which of the following areas include strict liability crimes?

traffic violations

narcotics laws

public health laws

all of these include strict liability crimes

15. In many states, when the age of a minor is an essential element of a crime, as in contributing to the delinquency of a child, the law

requires the defendant to testify

allows defendants to use the victim’s consent as a defense

contains a scienter element

does not allow mistake as to the age of the minor to be used as a

defense

16. For crimes in which a harm has occurred, the state must prove

the harm to the victim occurred immediately

the defendant’s act was the ordinary and proximate cause of the harm

both that harm to the victim occurred immediately, and that the defendant’s act was the ordinary and proximate cause of the harm

neither that harm to the victim occurred immediately, nor that the defendant’s act was the ordinary and proximate cause of the harm

17. While the classification system suggested by the Model Penal Code distinguishes between each level of mental state, the distinction

always makes a difference

does not always make a difference

is never important

is always important

18. The year-and-a-day murder rule

requires the victim die within a year and a day

has been abolished or amended in many states

requires the victim die within a year and a day, and has been abolished or amended in many states

does not require the victim die within a year and a day, and has not been abolished or amended in many states

19. The offense of carrying an unauthorized concealed weapon requires a showing of

actual possession

constructive possession

either actual or constructive possession

ownership of the weapon by the defendant

20. The mental element required in possession offenses is generally that of

intent or knowledge

recklessness

negligence

no mental element is required

21. The intent necessary for one or more elements of an offense is:

specific intent

global intent

mental intent

knowledgeable intent

22. The mental purpose or design to commit a specific act is called:

intent

motive

recklessness

negligence

23. The cause, inducement, or reason why an act is committed is called:

intent

motive

recklessness

negligence

24. Conclusive presumptions can be unconstitutional under the Due Process Clause because the presumption allows the prosecution to avoid proving:

an element of the crime charged

guilt beyond a reasonable doubt

motive

negligence

25. Which of the following is a name given to crimes which require no specific intent?

general intent crimes

conclusive intent crimes

substantive intent crimes

reasonable intent crimes

26. What is the highest degree of culpability according to the Model Penal Code?

purpose

knowledge

recklessness

negligence

27. Which of the following crimes includes the essential element of knowledge beyond a reasonable doubt that defendant knew the property was stolen?

receiving stolen property

robbery

possession of illegal substances

homicide

28. Which of the following is seldom made an essential element that must be proved beyond a reasonable doubt in many crimes?

motive

intent

guilt

all of these answers are essential elements

29. Motive can be important evidence in determining:

punishment

guilty

recklessness

negligence

30. Which of the following crimes require specific intent?

first-degree murder

selling alcohol to an underage person

distribution of illegal drugs

unregistered hand grenades

TRUE/FALSE

1. A party to a crime could be a person who aids and assists in the commission of the crime.

2. The term mens rea refers to the harm caused by the defendant’s forbidden act.

3. Not all crimes require proof that a defendant had a specific intent to achieve a specific end.

4. Motive is an essential element of most criminal offenses.

5. The motor vehicle codes of most states contain strict liability statutes.

6. According to the Model Penal Code, purposeful is a higher degree of culpability than negligent.

7. In the past, the year-and-a-day rule requires that criminal defendants be charged within that time frame following the unlawful act.

8. The use of presumptions in the prosecution’s case never present due process problems.

9. One cannot be guilty of possession of stolen property if one does not know property is stolen.

10. Presumptions and inferences enable a fact finder to conclude that because some facts have been proved, other facts may be presumed to be true.

COMPLETION

1. Mens rea is the criminal or state of mind.

2. The reason a person commits a crime is called _________.

3. An offense which requires no mens rea, such as speeding, is a strict __________ offense.

4. According to the Model Penal Code, a person acts __________ when she consciously disregards a substantial and unjustifiable risk.

5. The categories of culpability from the Model Penal Code include purpose, knowledge, recklessness, and .

6. Heroin found in an apartment will most likely be deemed to be in the __________ possession of the person controlling and occupying the apartment.

7. Only rarely is written evidence of the of a defendant available to the state.

8. A statement of substantive law that cannot be overcome with evidence showing otherwise is known as a ______________ presumption.

9. The penalties for liability offenses are usually lighter than “true” crimes.

10. Proximate cause is the ordinary and cause of a result.

#LEG 320 Week 2 Quiz – Strayer NEW

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HRM 500 Week 2 Discussion Questions– Strayer NEW

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Week 2- D1

From the scenario, propose two adjustments that you as a HR manager can make to support the changes related to high-performance work systems, technological changes, and a change in the employment relationship.

Week 2- D2

Imagine that you work for an organization that has decided to move its manufacturing to Mexico and focus more on research and information technology. Predict two ways that the shift will impact current employees and your role as the HR manager. Provide solutions to these foreseen changes.

#HRM 500 Week 2 Discussion Questions– Strayer NEW

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FIN 540 Week 2 Homework Problems – Strayer NEW

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Week 2

Basic Financial Tools: A Review

Homework Problems Chapter 18 and 19

Chapter 18

1. Which of the following statements is CORRECT?

a. Time lines cannot be constructed where some of the payments constitute an annuity but

others are unequal and thus are not part of the annuity.

b. A time line is not meaningful unless all cash flows occur annually.

c. Time lines are not useful for visualizing complex problems prior to doing actual calculations.

d. Time lines can be constructed to deal with situations where some of the cash flows occur annually but others occur quarterly.

e. Time lines can only be constructed for annuities where the payments occur at the end of the periods, i.e., for ordinary annuities.

2. You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the

investment?

a. The discount rate decreases.

b. The cash flows are in the form of a deferred annuity, and they total to $100,000. You

learn that the annuity lasts for only 5 rather than 10 years, hence that each payment is for

$20,000 rather than for $10,000.

c. The discount rate increases.

d. The riskiness of the investment’s cash flows decreases.

e. The total amount of cash flows remains the same, but more of the cash flows are

received in the earlier years and less are received in the later years.

3. Which of the following statements is CORRECT?

a. If some cash flows occur at the beginning of the periods while others occur at the ends,

then we have what the textbook defines as a variable annuity.

b. The cash flows for an ordinary (or deferred) annuity all occur at the beginning of the

periods.

c. If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series is by definition an annuity.

d. The cash flows for an annuity due must all occur at the ends of the periods.

e. The cash flows for an annuity must all be equal, and they must occur at regular intervals, such as once a year or once a month.

4. Your bank account pays a 5% nominal rate of interest. The interest is compounded quarterly.

Which of the following statements is CORRECT?

a. The periodic rate of interest is 5% and the effective rate of interest is also 5%.

b. The periodic rate of interest is 1.25% and the effective rate of interest is 2.5%.

c. The periodic rate of interest is 5% and the effective rate of interest is greater than 5%.

d. The periodic rate of interest is 1.25% and the effective rate of interest is greater than 5%.

e. The periodic rate of interest is 2.5% and the effective rate of interest is 5%.

5. A $250,000 loan is to be amortized over 8 years, with annual end-of-year payments. Which of these statements is CORRECT?

a. The proportion of interest versus principal repayment would be the same for each of the 8 payments.

b. The annual payments would be larger if the interest rate were lower.

c. If the loan were amortized over 10 years rather than 8 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 8-year amortization plan.

d. The proportion of each payment that represents interest as opposed to repayment of

Principal would be lower if the interest rate were lower.

e. The last payment would have a higher proportion of interest than the first payment.

Chapter 19

Homework

1. Operating leases often have terms that include

a. full amortization over the life of the lease.

b. very high penalties if the lease is canceled.

c. restrictions on how much the leased property can be used.

d. much longer lease periods than for most financial leases.

e. maintenance of the equipment by the lessor.

2. Which of the following statements is most CORRECT?

a. Capitalizing a lease means that the firm issues equity capital in proportion to its current

capital structure, in an amount sufficient to support the lease payment obligation.

b. The fixed charges associated with a lease can be as high as, but never greater than, the

fixed payments associated with a loan.

c. Capital, or financial, leases generally provide for maintenance by the lessor.

d. A key difference between a capital lease and an operating lease is that with a capital

lease, the lease payments provide the lessor with a return of the funds invested in the

asset plus a return on the invested funds, whereas with an operating lease the lessor

depends on the residual value to realize a full return of and on the investment.

e. Firms that use "off balance sheet" financing, such as leasing, would show lower debt

ratios if the effects of their leases were reflected in their financial statements.

3. Financial Accounting Standards Board (FASB) Statement #13 requires that for an unqualified audit report, financial (or capital) leases must be included in the balance sheet by reporting the

a. residual value as a liability.

b. present value of future lease payments as an asset and also showing this same amount

as an offsetting liability.

c. undiscounted sum of future lease payments as an asset and as an offsetting liability.

d. undiscounted sum of future lease payments, less the residual value, as an asset and as

an offsetting liability.

e. residual value as a fixed asset.

4. Heavy use of off-balance sheet lease financing will tend to

a. make a company appear less risky than it actually is because its stated debt ratio will

appear lower.

b. affect a company's cash flows but not its degree of risk.

c. have no effect on either cash flows or risk because the cash flows are already reflected in

the income statement.

d. affect the lessee's cash flows but only due to tax effects.

e. make a company appear more risky than it actually is because its stated debt ratio will be

increased.

5. In the lease versus buy decision, leasing is often preferable

a. because, generally, no down payment is required, and there are no indirect interest

costs.

b. because lease obligations do not affect the firm's risk as seen by investors.

c. because the lessee owns the property at the end of the least term.

d. because the lessee may have greater flexibility in abandoning the project in which the

leased property is used than if the lessee bought and owned the asset.

e. because it has no effect on the firm's ability to borrow to make other investments.

#FIN 540 Week 2 Homework Problems – Strayer NEW

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FIN 534 Homework Set 1– Strayer NEW

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Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.

Use the following information for Questions 1 through 8:

Assume that you recently graduated and have just reported to work as an investment advisor at the one of the firms on Wall Street. You have been presented and asked to review the following Income

Statement and Balance Sheets of one of the firm’s clients. Your boss has developed the following set of questions you must answer.

Income Statements and Balance Sheet

Balance Sheet 2012 2013 2014

Cash $9,000 $7,282 $14,000

Short-term investments 48,600 20,000 71,632

Accounts receivable 351,200 632,160 878,000

Inventories 715,200 1,287,360 1,716,480

Total current assets $1,124,000 $1,946,802 $2,680,112

Gross fixed assets 491,000 1,202,950 1,220,000

Less: Accumulated depreciation 146,200 263,160 383,160

Net fixed assets $344,800 $939,790 $836,840

Total assets $1,468,800 $2,886,592 $3,516,952

Liabilities and Equity

Accounts payable $145,600 $324,000 $359,800

Notes payable 200,000 720,000 300,000

Accruals 136,000 284,960 380,000

Total current liabilities $481,600 $1,328,960 $1,039,800

Long-term debt 323,432 1,000,000 500,000

Common stock (100,000 460,000 460,000 1,680,936

shares)

Retained earnings 203,768 97,632 296,216

Total equity $663,768 $557,632 $1,977,152

Total liabilities and equity $1,468,800 $2,886,592 $3,516,952

FIN 534 – Homework Set #1

Income Statements 2012 2013 2014

Sales $3,432,000 $5,834,400 $7,035,600

Cost of goods sold except depr. 2,864,000 4,980,000 5,800,000

Depreciation and amortization 18,900 116,960 120,000

Other expenses 340,000 720,000 612,960

Total operating costs $3,222,900 $5,816,960 $6,532,960

EBIT $209,100 $17,440 $502,640

Interest expense 62,500 176,000 80,000

EBT $146,600 ($158,560) $422,640

Taxes (40%) 58,640 -63,424 169,056

Net income $87,960 ($95,136) $253,584

Other Data 2012 2013 2014

Stock price $8.50 $6.00 $12.17

Shares outstanding 100,000 100,000 250,000

EPS $0.88 ($0.95) $1.104

DPS $0.22 0.11 0.22

Tax rate 40% 40% 40%

Book value per share $6.64 $5.58 $7.909

Lease payments $40,000 $40,000 $40,000

FIN 534 – Homework Set #1

Ratio Analysis 2012 2013 Industry

Average

Current 2.3 1.5 2.7

Quick 0.8 0.5 1.0

Inventory turnover 4 4 6.1

Days sales outstanding 37.3 39.6 32.0

Fixed assets turnover 10 6.2 7.0

Total assets turnover 2.3 2 2.5

Debt ratio 35.60% 59.60% 32.0%

Liabilities-to-assets ratio 54.80% 80.70% 50.0%

TIE 3.3 0.1 6.2

EBITDA coverage 2.6 0.8 8.0

Profit margin 2.60% −1.6% 3.6%

Basic earning power 14.20% 0.60% 17.8%

ROA 6.00% −3.3% 9.0%

ROE 13.30% −17.1% 17.9%

Price/Earnings (P/E) 9.7 −6.3 16.2

Price/Cash flow 8 27.5 7.6

Market/Book 1.3 1.1 2.9

1. What is the free cash flow for 2014?

2. Suppose Congress changed the tax laws so that Berndt’s depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow?

3. Calculate the 2014 current and quick ratios based on the projected balance sheet and income statement data. What can you say about the company’s liquidity position in 2013?

4. Calculate the 2014 inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover.

5. Calculate the 2014 debt ratio, liabilities-to-assets ratio, times-interest-earned, and EBITDA coverage ratios. What can you conclude from these ratios?

6. Calculate the 2014 profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these ratios?

7. Calculate the 2014 price / earnings ratio, price / cash flow ratio, and market / book ratio.

8. Use the extended DuPont equation to provide a summary and overview of company’s financial condition as projected for 2014. What are the firm’s major strengths and weaknesses?

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FIN 350 Week 2 Quiz – Strayer NEW

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Chapter 1—Role of Financial Markets and Institutions

1. Financial market participants who provide funds are called

deficit units.

surplus units.

primary units.

secondary units.

2. The main provider(s) of funds to the U.S. Treasury is (are)

households and businesses.

foreign financial institutions.

the Federal Reserve System.

foreign nonfinancial sectors.

3. The largest deficit unit is (are)

households and businesses.

foreign financial institutions.

the U.S. Treasury.

foreign nonfinancial sectors.

4. Those financial markets that facilitate the flow of short-term funds are known as

money markets.

capital markets.

primary markets.

secondary markets.

5. Funds are provided to the initial issuer of securities in the

secondary market.

primary market.

deficit market.

surplus market.

6. Which of the following is a capital market instrument?

a six-month CD

a three-month Treasury bill

a ten-year bond

an agreement for a bank to loan funds directly to a company for nine months

7. Which of the following is a money market security?

Treasury note

municipal bond

mortgage

commercial paper

8. The creditors in the federal funds market are

households.

depository institutions.

firms.

government agencies.

9. Equity securities have a ____ expected return than most long-term debt securities, and they exhibit a ____ degree of risk.

higher; higher

lower; lower

lower; higher

higher; lower

10. Money market securities generally have ____. Capital market securities are typically expected to have a ____.

less liquidity; higher annualized return

more liquidity; lower annualized return

less liquidity; lower annualized return

more liquidity; higher annualized return

11. If security prices fully reflect all available information, the markets for these securities are

efficient.

primary.

overvalued.

undervalued.

12. If markets are ____, investors could use available information ignored by the market to earn abnormally high returns.

perfect

active

inefficient

in equilibrium

13. If financial markets are efficient, this implies that all securities should earn the same return.

a. True

b. False

14. The Securities Act of 1933

required complete disclosure of relevant financial information for publicly offered securities in the primary market.

declared trading strategies to manipulate the prices of public secondary securities illegal.

declared misleading financial statements for public primary securities illegal.

required complete disclosure of relevant financial information for securities traded in the secondary market.

all of the above

15. The Securities Exchange Commission (SEC) was established by the

Federal Reserve Act.

McFadden Act.

Securities Exchange Act of 1934.

Glass-Steagall Act.

none of the above

16. Common stock is an example of a(n)

debt security.

money market security.

equity security.

A and B

17. If financial markets were ____, all information about any securities for sale in primary and secondary markets would be continuously and freely available to investors.

efficient

inefficient

perfect

imperfect

18. The typical role of a securities firm in a public offering of securities is to

purchase the entire issue for its own investment.

place the entire issue with a single large investor.

spread the issue across several investors until the entire issue is sold.

provide all large investors with loans so that they can invest in the offering.

19. Without the participation of financial intermediaries in financial market transactions,

information and transaction costs would be lower.

transaction costs would be higher but information costs would be unchanged.

information costs would be higher but transaction costs would be unchanged.

information and transaction costs would be higher.

20. Which of the following is most likely to be described as a depository institution?

finance companies

securities firms

credit unions

pension funds

insurance companies

21. In aggregate, ____ are the most dominant depository institution, with more total assets than other depository institutions.

commercial banks

savings banks

credit unions

S&Ls

22. Which of the following is a nondepository financial institution?

savings banks

commercial banks

savings and loan associations

mutual funds

23. Which of the following distinguishes credit unions from commercial banks and savings institutions?

Credit unions are non-profit

Credit unions accept deposits but do not make loans

Credit unions make loans but do not accept deposits

Savings institutions restrict their business to members who share a common bond

24. When a securities firm acts as a broker, it

guarantees the issuer a specific price for newly issued securities.

makes a market in specific securities by adjusting its own inventory.

executes transactions between two parties.

purchases securities for its own account.

25. When a securities firm acts as a(n) ____, it maintains a position in securities.

adviser

dealer

broker

none of the above

26. ____ obtain funds by issuing securities, then lend the funds to individuals and small businesses.

Finance companies

Securities firms

Mutual funds

Insurance companies

27. Households with ____ are served by ____.

deficient funds; depository institutions and finance companies

deficient funds; finance companies only

savings; finance companies only

savings; pension funds and finance companies

28. ____ concentrate on mortgage loans.

Finance companies

Commercial banks

Savings institutions

Credit unions

29. ____ securities have a maturity of one year or less; ____ securities are generally more liquid.

Money market; capital market

Money market; money market

Capital market; money market

Capital market; capital market

30. Which of the following is not a major investor in stocks?

commercial banks

insurance companies

mutual funds

pension funds

31. Which of the following financial intermediaries commonly invests in stocks and bonds?

pension funds

insurance companies

mutual funds

all of the above

32. Securities are certificates that represent a claim on the issuer.

a. True

b. False

33. Debt securities are certificates that represent debt (borrowed funds) by the issuer.

a. True

b. False

34. A five-year security was purchased two years ago by an investor who plans to resell it. The security will be sold by the investor in the so-called

secondary market.

primary market.

deficit market.

surplus market.

35. When security prices fully reflect all available information, the markets for these securities are said to be efficient.

a. True

b. False

36. If markets are perfect, securities buyers and sellers to not have full access to information and cannot always break down securities to the precise size they desire.

a. True

b. False

37. A broker executes securities transactions between two parties and charges a fee reflected in the bid-ask spread.

a. True

b. False

38. The euro increased business between European countries and created a more competitive environment in Europe.

a. True

b. False

39. In recent years, financial institutions have consolidated to capitalize on economies of scale and on economies of scope.

a. True

b. False

40. Securities are certificates that represent a claim on the provider of funds.

a. True

b. False

41. Debt securities include commercial paper, Treasury bonds, and corporate bonds.

a. True

b. False

42. Common types of capital market securities include Treasury bills and commercial paper.

a. True

b. False

43. Common types of money market securities include negotiable certificates of deposit and Treasury bills.

a. True

b. False

44. Money market securities are commonly issued in order to finance the purchase of assets such as buildings, equipment, or machinery.

a. True

b. False

45. The total asset value of savings institutions is larger than that of commercial banks.

a. True

b. False

46. Financial markets facilitating the flow of short-term funds with maturities of less than one year are known as

secondary markets.

capital markets.

primary markets.

money markets.

none of the above

47. Which of the following transactions would not be considered a secondary market transaction?

An individual investor purchases some existing shares of stock in IBM through his broker.

An institutional investor sells some Disney stock through its broker.

A firm that was privately held engages in an offering of stock to the public.

All of the above are secondary market transactions.

48. If investors speculate in the underlying asset rather than derivative contracts on the underlying asset, they will probably achieve ____ returns, and they are exposed to relatively ____ risk.

lower; lower

lower; higher

higher; lower

higher; higher

49. ____ maintain a larger amount of assets in aggregate than the other types of nondepository institutions.

Finance companies

Mutual funds

Life insurance companies

Securities firms

50. A common use of funds for ____ is investment in stocks and businesses, while their main use of funds is providing loans to households and businesses.

savings institutions

commercial banks

mutual funds

finance companies

51. Long-term debt securities tend to have a ____ expected return and ____ risk than money market securities.

lower; lower

lower; higher

higher; lower

higher; higher

52. Common types of capital market securities include Treasury bills and commercial paper.

a. True

b. False

53. Common types of money market securities include negotiable certificates of deposit and Treasury bills.

a. True

b. False

54. Capital market securities are commonly issued in order to finance the purchase of assets such as buildings, equipment, or machinery.

a. True

b. False

55. Commercial banks in aggregate have more assets than credit unions.

a. True

b. False

56. Those participants who receive more money than they spend are referred to as

deficit units.

surplus units.

borrowing units.

government units.

57. Equity securities

have a maturity.

pay interest on a periodic basis.

represent ownership in the issuer.

repay the principal amount at maturity.

58. The term ____ involves decisions such as how much funding to obtain, and how to invest the proceeds to expand operations.

corporate finance

investment management

financial markets and institutions

none of the above

59. There is a ____ relationship between the risk of a security and the expected return from investing in the security.

positive

negative

indeterminable

none of the above

60. If a security is undervalued, some investors would capitalize from this by purchasing that security. As a result, the security's price will ____, resulting in a ____ return for those investors.

rise; lower

fall; higher

fall; lower

rise; higher

61. The credit crisis in the 2008-2009 period was caused by weak economies in Asia.

a. True

b. False

62. ____ are classified as a depository institution.

Credit unions

Pension funds

Finance companies

Securities firms

63. The main reason that depository institutions experienced financial problems during the credit crisis was their investment in:

mortgages.

money market securities.

stock.

Treasury bonds.

64. Those financial markets that facilitate the flow of short-term funds (with maturities of less than one year) are known as capital markets, while those that facilitate the flow of long-term funds are known as money markets.

a. True

b. False

65. Treasury bonds have a maturity of one to three years.

a. True

b. False

66. Since markets are efficient, institutional and individual investors should ignore the various investment instruments available.

a. True

b. False

67. Speculating with derivative contracts on an underlying asset typically results in both higher risk and higher returns than speculating in the underlying asset itself.

a. True

b. False

68. When security prices fully reflect all available information, the markets for these securities are said to be perfect.

a. True

b. False

69. Securities that are not as safe and liquid as other securities are never considered for investment by anyone.

a. True

b. False

70. By requiring full disclosure of information, securities laws prevent investors from making poor investment decisions.

a. True

b. False

71. When a depository institution offers a loan, it is acting as a creditor.

a. True

b. False

72. Savings institutions represent a nondepository institution.

a. True

b. False

73. Most mutual funds obtain funds by issuing securities, then lend the funds to individuals and small businesses.

a. True

b. False

74. Institutional investors not only provide financial support to companies but exercise some degree of corporate control over them.

a. True

b. False

75. Which of the following is not a reason why depository financial institutions are popular?

They offer deposit accounts that can accommodate the amount and liquidity characteristics desired by most surplus units.

They repackage funds received from deposits to provide loans of the size and maturity desired by deficit units.

They accept the risk on loans provided.

They use their information resources to act as a broker, executing securities transactions between two parties.

They have more expertise than individual surplus units in evaluating the creditworthiness of deficit units.

76. According to your text, which of the following is not considered a money market security?

Treasury bills

Treasury notes

retail CD

banker's acceptance

commercial paper

77. ____ are not considered capital market securities.

Repurchase agreements

Municipal bonds

Corporate bonds

Equity securities

Mortgages

78. ____ are long-term debt obligations issued by corporations and government agencies to support their operations.

Common stock

Derivative securities

Bonds

None of the above

79. Equity securities should normally have a ____ expected return and ____ risk than money market securities.

lower; lower

lower; higher

higher; lower

higher; higher

80. If investors speculate in derivative contracts rather than the underlying asset, they will probably achieve ____ returns, and they are exposed to relatively ____ risk.

lower; lower

lower; higher

higher; lower

higher; higher

81. When particular securities are perceived to be ____ by the market, their prices decrease when they are sold by investors.

undervalued

overvalued

fairly priced

efficient

none of the above

82. Which of the following are not considered depository financial institutions?

finance companies

commercial banks

savings institutions

credit unions

All of the above are depository financial institutions.

83. The main source of funds for ____ is proceeds from selling securities to households and businesses, while their main use of funds is providing loans to households and businesses.

savings institutions

commercial banks

mutual funds

finance companies

pension funds

84. Which of the following statements is incorrect?

Financial markets attract funds from investors and channel the funds to corporations.

Money markets enable corporations to borrow funds on a short-term basis so that they can support their existing operations.

Financial institutions serve solely as intermediaries with the financial markets and never serve as investors.

Investors seek to invest their funds in the stock of firms that are presently undervalued and have much potential to improve.

85. Which of the following is not a typical money market security?

Treasury bills

Treasury bonds

Commercial paper

Negotiable certificates of deposit

86. Debt securities issued by a small firm may be ________, meaning that _______ investors want to invest in those securities.

a. liquid; many

a. liquid; not many

a. illiquid; not many

a. illiquid; many

87. Valuing stocks is easier than valuing debt securities because stocks promise to provide investors with specific payments at regular intervals.

a. True

b. False

88. ____________ applies psychology to financial decisions and offers an explanation for why markets are not always efficient.

a. Psychological marketing

a. Behavioral finance

a. Inefficient markets theory

a. Financial psychology

89. International integration of securities markets allows:

a. governments and corporations to have easier access to funding from creditors and investors in other countries.

a. investors and creditors to benefit from investment opportunities in other countries.

a. one’s country’s financial problems to adversely affect other countries.

a. All of the above

90. The foreign exchange market facilitates the exchange of:

a. information between investors in different countries.

a. debt securities.

a. equity securities.

a. currencies.

91. Which of the following is not an example of the government’s recent increased role in financial markets?

a. the Federal Reserve’s purchase of debt securities during the credit crisis

a. regulations changing the way that the credit risk of bonds is assessed

a. regulations setting maximum rates for Treasury securities

a. increased monitoring of stock trading and prosecution of those who trade on inside information

92. Commercial paper represents long-term debt obligations created to finance the purchase of commercial property.

a. True

b. False

93. The risk that financial problems could spread among financial institutions and across financial markets, causing a collapse of the financial system, is known as:

a. systemic risk.

a. leverage risk.

a. financial meltdown risk.

a. credit risk.

94. Systemic risk exists because:

a. there is no government regulation of financial markets.

a. financial institutions invest in similar securities and therefore are similarly exposed to large declines in prices of those securities.

a. financial institutions borrow using long-term debt securities but lend their funds for short-term periods.

a. financial institutions invest heavily in Treasury securities and therefore are exposed to the possibility that the government will default on its debts.

Chapter 2—Determination of Interest Rates

MULTIPLE CHOICE

1. The level of installment debt as a percentage of disposable income is generally ____ during recessionary periods.

higher

lower

zero

negative

2. At any given point in time, households would demand a ____ quantity of loanable funds at ____ rates of interest.

greater; higher

greater; lower

smaller; lower

none of the above

3. Businesses demand loanable funds to

finance installment debt.

subsidize other companies.

invest in fixed and short-term assets.

none of the above

4. The required return to implement a given business project will be ____ if interest rates are lower. This implies that businesses will demand a ____ quantity of loanable funds when interest rates are lower.

greater; lower

lower; greater

lower; lower

greater; greater

5. If interest rates are ____, ____ projects will have positive NPVs.

higher; more

lower; more

lower; no

none of the above

6. The demand for funds resulting from business investment in short-term assets is ____ related to the number of projects implemented, and is therefore ____ related to the interest rate.

inversely; positively

positively; inversely

inversely; inversely

positively; positively

7. If economic conditions become less favorable, then:

expected cash flows on various projects will increase.

more proposed projects will have expected returns greater than the hurdle rate.

there would be additional acceptable business projects.

there would be a decreased demand by business for loanable funds.

8. As a result of more favorable economic conditions, there is a(n) ____ demand for loanable funds, causing an ____ shift in the demand curve.

decreased; inward

decreased; outward

increased; outward

increased; inward

9. The federal government demand for loanable funds is ____. If the budget deficit was expected to increase, the federal government demand for loanable funds would ____.

interest elastic; decrease

interest elastic; increase

interest inelastic; increase

interest inelastic; decrease

10. Other things being equal, foreign governments and corporations would demand ____ U.S. funds if their local interest rates were lower than U.S. rates. Therefore, for a given set of foreign interest rates, foreign demand for U.S. funds is ____ related to U.S. interest rates.

less; inversely

more; positively

less; positively

more; inversely

11. For a given set of foreign interest rates, the quantity of U.S. loanable funds demanded by foreign governments or firms will be ____ U.S. interest rates.

positively related to

inversely related to

unrelated to

none of the above

12. The quantity of loanable funds supplied is normally

highly interest elastic.

more interest elastic than the demand for loanable funds.

less interest elastic than the demand for loanable funds.

equally interest elastic as the demand for loanable funds.

A and B

13. The ____ sector is the largest supplier of loanable funds.

household

government

business

none of the above

14. If a strong economy allows for a large ____ in households income, the supply curve will shift ____.

decrease; outward

increase; inward

increase; outward

none of the above

15. The equilibrium interest rate

equates the aggregate demand for funds with the aggregate supply of loanable funds.

equates the elasticity of the aggregate demand and supply for loanable funds.

decreases as the aggregate supply of loanable funds decreases.

increases as the aggregate demand for loanable funds decreases.

16. The equilibrium interest rate should

fall when the aggregate supply funds exceeds aggregate demand for funds.

rise when the aggregate supply of funds exceeds aggregate demand for funds.

fall when the aggregate demand for funds exceeds aggregate supply of funds.

rise when aggregate demand for funds equals aggregate supply of funds.

B and C

17. Which of the following is likely to cause a decrease in the equilibrium U.S. interest rate, other things being equal?

a decrease in savings by foreign savers

an increase in inflation

pessimistic economic projections that cause businesses to reduce expansion plans

a decrease in savings by U.S. households

18. The Fisher effect states that the

nominal interest rate equals the expected inflation rate plus the real rate of interest.

nominal interest rate equals the real rate of interest minus the expected inflation rate.

real rate of interest equals the nominal interest rate plus the expected inflation rate.

expected inflation rate equals the nominal interest rate plus the real rate of interest.

19. If the real interest rate was negative for a period of time, then

inflation is expected to exceed the nominal interest rate in the future.

inflation is expected to be less than the nominal interest rate in the future.

actual inflation was less than the nominal interest rate.

actual inflation was greater than the nominal interest rate.

20. If inflation is expected to decrease, then

savers will provide less funds at the existing equilibrium interest rate.

the equilibrium interest rate will increase.

the equilibrium interest rate will decrease.

borrowers will demand more funds at the existing equilibrium interest rate.

21. If inflation turns out to be lower than expected

savers benefit.

borrowers benefit while savers are not affected.

savers and borrowers are equally affected.

savers are adversely affected but borrowers benefit.

22. If the economy weakens, there is ____ pressure on interest rates. If the Federal Reserve increases the money supply there is ____ pressure on interest rates (assume that inflationary expectations are not affected).

upward; upward

upward; downward

downward; upward

downward; downward

23. What is the basis of the relationship between the Fisher effect and the loanable funds theory?

the saver's desire to maintain the existing real rate of interest

the borrower's desire to achieve a positive real rate of interest

the saver's desire to achieve a negative real rate of interest

B and C

24. Assume that foreign investors who have invested in U.S. securities decide to decrease their holdings of U.S. securities and to instead increase their holdings of securities in their own countries. This should cause the supply of loanable funds in the United States to ____ and should place ____ pressure on U.S. interest rates.

decrease; upward

decrease; downward

increase; downward

increase; upward

25. Assume that foreign investors who have invested in U.S. securities decide to increase their holdings of U.S. securities. This should cause the supply of loanable funds in the United States to ____ and should place ____ pressure on U.S. interest rates.

decrease; upward

decrease; downward

increase; downward

increase; upward

26. If the federal government needs to borrow additional funds, this borrowing reflects a(n) ____ in the supply of loanable funds, and a(n) ____ in the demand for loanable funds.

increase; no change

decrease; no change

no change; increase

no change; decrease

27. If the federal government reduces its budget deficit, this causes a(n) ____ in the supply of loanable funds, and a(n) ____ in the demand for loanable funds.

increase; no change

decrease; no change

no change; increase

no change; decrease

28. Due to expectations of higher inflation in the future, we would typically expect the supply of loanable funds to ____ and the demand for loanable funds to ____.

increase; decrease

increase; increase

decrease; increase

decrease; decrease

29. Due to expectations of lower inflation in the future, we would typically expect the supply of loanable funds to ____ and the demand for loanable funds to ____.

increase; decrease

increase; increase

decrease; increase

decrease; decrease

30. If the real interest rate is expected by a particular person to become negative, then the purchasing power of his or her savings would be ____, as the inflation rate is expected to be ____ the existing nominal interest rate.

decreasing; less than

decreasing; greater than

increasing; greater than

increasing; less than

31. If economic expansion is expected to increase, then demand for loanable funds should ____ and interest rates should ____.

increase; increase

increase; decrease

decrease; decrease

decrease; increase

32. If economic expansion is expected to decrease, the demand for loanable funds should ____ and interest rates should ____.

increase; increase

increase; decrease

decrease; decrease

decrease; increase

33. If the real interest rate was stable over time, this would suggest that there is ____ relationship between inflation and nominal interest rate movements.

a positive

an inverse

an uncertain (cannot be determined from information above)

34. If inflation and nominal interest rates move more closely together over time than they did in earlier periods, this would ____ the volatility of the real interest rate movements over time.

increase

decrease

have an effect, which cannot be determined with above information, on

have no effect on

35. Canada and the U.S. are major trading partners. If Canada experiences a major increase in economic growth, it could place ____ pressure on Canadian interest rates and ____ pressure on U.S. interest rates.

upward; upward

upward; downward

downward; downward

downward; upward

36. If investors shift funds from stocks into bank deposits, this ____ the supply of loanable funds, and places ____ pressure on interest rates.

increases; upward

increases; downward

decreases; downward

decreases; upward

37. When Japanese interest rates rise, and if exchange rate expectations remain unchanged, the most likely effect is that the supply of loanable funds provided by Japanese investors to the United States will ____, and the U.S. interest rates will ____.

increase; increase

increase; decrease

decrease; decrease

decrease; increase

38. Which of the following will probably not result in an increase in the business demand for loanable funds?

an increase in positive net present value (NPV) projects

a reduction in interest rates on business loans

a recession

none of the above

39. If the aggregate demand for loanable funds increases without a corresponding ____ in aggregate supply, there will be a ____ of loanable funds.

increase; surplus

increase; shortage

decrease; surplus

decrease; shortage

40. A ____ federal government deficit increases the quantity of loanable funds demanded at any prevailing interest rate, causing an ____ shift in the demand schedule.

higher; inward

higher; outward

lower; outward

none of the above

41. Which of the following is not true regarding foreign interest rates?

The large flow of funds between countries causes interest rates in any given country to become more susceptible to interest rate movements in other countries.

The expectations of a strong dollar should cause a flow of funds to the U.S.

An increase in a foreign country's interest rates will encourage investors in that country to invest their funds in other countries.

All of the above are true regarding foreign interest rates.

42. Which of the following is least likely to affect household demand for loanable funds?

a decrease in tax rates

an increase in interest rates

a reduction in positive net present value (NPV) projects available

All of the above are equally likely to affect household demand for loanable funds.

43. Which of the following statements is incorrect?

The Fed's monetary policy is intended to control the economic conditions in the U.S.

The Fed's monetary policy affects the supply of loanable funds, which affects interest rates.

By influencing interest rates, the Fed is able to influence the amount of money that corporations and households are willing to borrow and spend.

All of the statements above are true.

44. The ____ suggests that the market interest rate is determined by factors that control the supply of and demand for loanable funds.

Fisher effect

loanable funds theory

real interest rate

none of the above

45. Which of the following will probably not result in an increase in the business demand for loanable funds?

an increase in positive net present value (NPV) projects

a reduction in interest rates on business loans

a recession

All of the above will result in an increase in the business demand for loanable funds.

46. Other things being equal, a ____ quantity of U.S. funds would be demanded by foreign governments and corporations if their domestic interest rates were ____ relative to U.S. rates.

smaller; high

larger; high

larger; low

none of the above

47. The federal government demand for funds is said to be interest inelastic, or ____ to interest rates.

sensitive

insensitive

relatively sensitive as compared to other sectors

none of the above

48. If the aggregate demand for loanable funds increases without a corresponding ____ in aggregate supply, there will be a ____ of loanable funds.

increase; surplus

increase; shortage

decrease; surplus

decrease; shortage

49. The expected impact of an increased expansion by businesses is an ____ shift in the demand schedule and ____ in the supply schedule.

inward; an inward shift

inward; an outward shift

outward; an inward shift

outward; no obvious change

50. Which of the following is a valid representation of the Fisher effect?

i = E(INF) + iR

iR = E(INF) + i

E(INF) = i + iR

none of the above

51. The real interest rate can be forecasted by subtracting the ____ from the ____ for that period.

nominal interest rate; expected inflation rate

prime rate; nominal interest rate

expected inflation rate; nominal interest rate

prime rate; expected inflation rate

52. According to the Fisher effect, expectations of higher inflation cause savers to require a ____ on savings.

higher nominal interest rate

higher real interest rate

lower nominal interest rate

lower real interest rate

53. A ____ federal government deficit increases the quantity of loanable funds demanded at any prevailing interest rate, causing an ____ shift in the demand schedule.

higher; inward

higher; outward

lower; outward

none of the above

54. The federal government’s demand for funds is ________, and municipal governments’ demand for funds is somewhat ____________.

interest-inelastic; interest-inelastic

interest-elastic; interest-elastic

interest-inelastic; interest-elastic

interest-elastic; interest-inelastic

55. The substantial decline in interest rates during the credit crisis is attributed to which of the following changes in the market for loanable funds?

a. an increase in both the supply of and the demand for loanable funds

a. a decrease in both the supply of and the demand for loanable funds

a. a decrease in the supply of loanable funds and an increase in the demand for loanable funds

a. an increase in the supply of loanable funds and a decrease in the demand for loanable funds

56. The crowding-out effect occurs when:

a. foreign investors crowd out U.S. investors in the market for loanable funds.

a. the federal government’s demand for loanable funds due to a higher budget deficit crowds out the private demand in the market for loanable funds.

a. institutional investors crowd out individual investors in the market for loanable funds.

a. firms and municipal governments crowd out households in the market for loanable funds.

TRUE/FALSE

57. According to the loanable funds theory, market interest rates are determined by the factors that control the supply of and demand for loanable funds.

a. True

b. False

58. The supply of loanable funds in the U.S. is partly determined by the monetary policy implemented by the Federal Reserve System.

a. True

b. False

59. At any point in time, households and businesses demand a greater quantity of loanable funds at lower rates of interest.

a. True

b. False

60. The business demand for funds resulting from short-term investments is inversely related to the number of projects implemented and inversely related to the interest rate.

a. True

b. False

61. Other things being equal, a smaller quantity of U.S. funds would be demanded by foreign governments and corporations if their domestic interest rates were high relative to U.S. rates.

a. True

b. False

62. If foreign interest rates fall, foreign firms and governments would likely reduce their demand for U.S. funds.

a. True

b. False

63. Since the aggregate demand for loanable funds is the sum of the quantities demanded by the separate sectors, and since most of these sectors are likely to demand a larger quantity of funds at lower interest rates (other things being equal), the aggregate demand for loanable funds is positively related to interest rates at any point in time.

a. True

b. False

64. In general, suppliers of loanable funds are willing to supply more funds if the interest rate is higher.

a. True

b. False

65. If the aggregate demand for loanable funds increases without a corresponding increase in aggregate supply, there will be a surplus of loanable funds.

a. True

b. False

66. The relationship between interest rates and expected inflation is often referred to as the loanable funds theory.

a. True

b. False

67. According to the Fisher effect, if the real interest rate is zero, the nominal interest rate must be equal to the expected inflation rate.

a. True

b. False

68. To forecast interest rates using the Fisher effect, the real interest rate for an upcoming period can be forecasted by subtracting the expected inflation rate over that period from the nominal interest rate quoted for that period.

a. True

b. False

69. According to the Fisher effect, when the inflation rate is lower than anticipated, the real interest rate is relatively low.

a. True

b. False

70. Forecasters should consider future plans for corporate expansion and the future state of the economy when forecasting business demand for loanable funds.

a. True

b. False

#FIN 350 Week 2 Quiz – Strayer NEW

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FIN 320 Week 2 Quiz – Strayer NEW

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Chapter:1 __________________________________________________________________________

Financial assets represent _____ of total assets of U.S. households.

over 60%

over 90%

under 10%

about 30%

Real assets in the economy include all but which one of the following?

Land

Buildings

Consumer durables

Common stock

Net worth represents _____ of the liabilities and net worth of commercial banks.

about 51%

about 91%

about 11%

about 31%

According to the Flow of Funds Accounts of the United States, the largest single asset of U.S. households is ___.

mutual fund shares

real estate

pension reserves

corporate equity

According to the Flow of Funds Accounts of the United States, the largest liability of U.S. households is ________.

mortgages

consumer credit

bank loans

gambling debts

____ is not a derivative security.

A share of common stock

A call option

A futures contract

None of these options (All of the answers are derivative securities.)

According to the Flow of Funds Accounts of the United States, the largest financial asset of U.S. households is ____.

mutual fund shares

corporate equity

pension reserves

personal trusts

Active trading in markets and competition among securities analysts helps ensure that: I. Security prices approach informational efficiency II. Riskier securities are priced to offer higher potential returns III. Investors are unlikely to be able to consistently find under- or overvalued securities

I only

I and II only

II and III only

I, II, and III

The material wealth of society is determined by the economy's _________, which is a function of the economy's _________.

investment bankers; financial assets

investment bankers; real assets

productive capacity; financial assets

productive capacity; real assets

10.

Which of the following is not a money market security?

U.S. Treasury bill

6-month maturity certificate of deposit

Common stock

Bankers' acceptance

11.

__________ assets generate net income to the economy, and __________ assets define allocation of income among investors.

Financial, financial

Financial, real

Real, financial

Real, real

12.

Which of the following are financial assets? I. Debt securities II. Equity securities III. Derivative securities

I only

I and II only

II and III only

I, II, and III

13.

__________ are examples of financial intermediaries.

Commercial banks

Insurance companies

Investment companies

All of these options

14.

Asset allocation refers to _________.

the allocation of the investment portfolio across broad asset classes

the analysis of the value of securities

the choice of specific assets within each asset class

none of these options

15.

Which one of the following best describes the purpose of derivatives markets?

Transferring risk from one party to another

Investing for a short time period to earn a small rate of return

Investing for retirement

Earning interest income

16.

More than _____________ of currency is traded each day in the market for foreign exchange.

$300 million

$1 billion

$30 billion

$1 trillion

17.

Security selection refers to the ________.

allocation of the investment portfolio across broad asset classes

analysis of the value of securities

choice of specific securities within each asset class

top-down method of investing

18.

Which of the following is an example of an agency problem?

Managers engage in empire building.

Managers protect their jobs by avoiding risky projects.

Managers over consume luxuries such as corporate jets.

All of these options are examples of agency problems.

19.

_____ is a mechanism for mitigating potential agency problems.

Tying income of managers to success of the firm

Directors defending top management

Antitakeover strategies

The straight voting method of electing the board of directors

20.

__________ is (are) real assets.

Bonds

Production equipment

Stocks

Commercial paper

21.

__________ portfolio construction starts with selecting attractively priced securities.

Bottom-up

Top-down

Upside-down

Side-to-side

22.

In a market economy, capital resources are primarily allocated by ____________.

governments

the SEC

financial markets

investment bankers

23.

__________ represents an ownership share in a corporation.

A call option

Common stock

A fixed-income security

Preferred stock

24.

The value of a derivative security _________.

depends on the value of another related security

affects the value of a related security

is unrelated to the value of a related security

can be integrated only by calculus professors

25.

Commodity and derivative markets allow firms to adjust their _________.

management styles

focus from their main line of business to their investment portfolios

ways of doing business so that they'll always have positive returns

exposure to various business risks

26.

__________ portfolio management calls for holding diversified portfolios without spending effort or resources attempting to improve investment performance through security analysis.

Active

Momentum

Passive

Market-timing

27.

Financial markets allow for all but which one of the following?

Shift consumption through time from higher-income periods to lower

Price securities according to their riskiness

Channel funds from lenders of funds to borrowers of funds

Allow most participants to routinely earn high returns with low risk

28.

Financial intermediaries exist because small investors cannot efficiently _________.

diversify their portfolios

gather information

monitor their portfolios

all of these options

29.

Methods of encouraging managers to act in shareholders' best interest include: I. Threat of takeover II. Proxy fights for control of the board of directors III. Tying managers' compensation to stock price performance

I only

I and II only

II and III only

I, II, and III

30.

Firms that specialize in helping companies raise capital by selling securities to the public are called _________.

pension funds

investment banks

savings banks

REITs

31.

In securities markets, there should be a risk-return trade-off with higher-risk assets having _________ expected returns than lower-risk assets.

higher

lower

the same

The answer cannot be determined from the information given.

32.

When the market is more optimistic about a firm, its share price will ______; as a result, it will need to issue _______ shares to raise funds that are needed.

rise; fewer

fall; fewer

rise; more

fall; more

33.

Security selection refers to _________.

choosing specific securities within each asset class

deciding how much to invest in each asset class

deciding how much to invest in the market portfolio versus the riskless asset

deciding how much to hedge

34.

An example of a derivative security is _________.

a common share of General Motors

a call option on Intel stock

a Ford bond

a U.S. Treasury bond

35.

__________ portfolio construction starts with asset allocation.

Bottom-up

Top-down

Upside-down

Side-to-side

36.

Which one of the following firms falsely claimed to have a $4.8 billion bank account at Bank of America and vastly understated its debts, eventually resulting in the firm's bankruptcy?

WorldCom

Enron

Parmalat

Global Crossing

37.

Debt securities promise: I. A fixed stream of income II. A stream of income that is determined according to a specific formula III. A share in the profits of the issuing entity

I only

I or II only

I and III only

II or III only

38.

The Sarbanes-Oxley Act tightened corporate governance rules by requiring all but which one of the following?

Required that corporations have more independent directors

Required that the CFO personally vouch for the corporation's financial statements

Required that firms could no longer employ investment bankers to sell securities to the public

Required the creation of a new board to oversee the auditing of public companies

39.

The success of common stock investments depends on the success of _________.

derivative securities

fixed-income securities

the firm and its real assets

government methods of allocating capital

40.

The historical average rate of return on large company stocks since 1926 has been _____.

12%

20%

41.

The average rate of return on U.S. Treasury bills since 1926 was _________.

less than 1%

less than 3%

less than 4%

less than 7%

42.

An example of a real asset is: I. A college education II. Customer goodwill III. A patent

I only

II only

I and III only

I, II, and III

43.

The 2002 law designed to improve corporate governance is titled the _____.

Pension Reform Act

ERISA

Financial Services Modernization Act

Sarbanes-Oxley Act

44.

Which of the following is not a financial intermediary?

a mutual fund

an insurance company

a real estate brokerage firm

a savings and loan company

45.

The combined liabilities of American households represent approximately __________ of combined assets.

11%

19%

25%

33%

46.

In 2011 real assets represented approximately __________ of the total asset holdings of American households.

32%

42%

48%

55%

47.

In 2011 mortgages represented approximately __________ of total liabilities and net worth of American households.

12%

14%

28%

42%

48.

Liabilities equal approximately _____ of total assets for nonfinancial U.S. businesses.

10%

25%

48%

75%

49.

Which of the following is not an example of a financial intermediary?

Goldman Sachs

Allstate Insurance

First Interstate Bank

IBM

50.

Real assets represent about ____ of total assets for commercial banks.

15%

25%

40%

51.

Money market securities are characterized by: I. Maturity less than 1 year II. Safety of the principal investment III. Low rates of return

I only

I and II only

I and III only

I, II, and III

52.

After much investigation, an investor finds that Intel stock is currently underpriced. This is an example of ______.

asset allocation

security analysis

top-down portfolio management

passive management

53.

After considering current market conditions, an investor decides to place 60% of her funds in equities and the rest in bonds. This is an example of _____.

asset allocation

security analysis

top-down portfolio management

passive management

54.

Suppose an investor is considering one of two investments that are identical in all respects except for risk. If the investor anticipates a fair return for the risk of the security he invests in, he can expect to _____.

earn no more than the Treasury-bill rate on either security.

pay less for the security that has higher risk.

pay less for the security that has lower risk.

earn more if interest rates are lower.

55.

The efficient market hypothesis suggests that _______.

active portfolio management strategies are the most appropriate investment strategies

passive portfolio management strategies are the most appropriate investment strategies

either active or passive strategies may be appropriate, depending on the expected direction of the market

a bottom-up approach is the most appropriate investment strategy

56.

In a perfectly efficient market the best investment strategy is probably _____.

an active strategy.

a passive strategy.

asset allocation.

market timing.

57.

Market signals will help to allocate capital efficiently only if investors are acting _____.

on the basis of their individual hunches.

as directed by financial experts.

as dominant forces in the economy.

on accurate information.

58.

Which of the following is (are) true about hedge funds? I. They are open to institutional investors. II. They are open to wealthy individuals. III. They are more likely than mutual funds to pursue simple strategies.

I and II only

I and III only

II and III only

I, II, and III

59.

Venture capital is _________.

frequently used to expand the businesses of well-established companies

supplied by venture capital funds and individuals to start-up companies

illegal under current U.S. laws

most frequently issued with the help of investment bankers

60.

Individuals may find it more advantageous to purchase claims from a financial intermediary rather than directly purchasing claims in capital markets because: I. Intermediaries are better diversified than most individuals II. Intermediaries can exploit economies of scale in investing that individual investors cannot III. Intermediated investments usually offer higher rates of return than direct capital market claims

I only

I and II only

II and III only

I, II, and III

61.

Surf City Software Company develops new surf forecasting software. It sells the software to Microsoft in exchange for 1,000 shares of Microsoft common stock. Surf City Software has exchanged a _____ asset for a _____ asset in this transaction.

real; real

financial; financial

real; financial

financial; real

62.

Stone Harbor Products takes out a bank loan. It receives $100,000 and signs a promissory note to pay back the loan over 5 years. In this transaction, _____.

a new financial asset was created

a financial asset was traded for a real asset

a financial asset was destroyed

a real asset was created

63.

Which of the following firms was not engaged in a major accounting scandal between 2000 and 2005?

General Electric

Parmalat

Enron

WorldCom

64.

Accounting scandals can often be attributed to a particular concept in the study of finance known as the _____.

agency problem

risk-return trade-off

allocation of risk

securitization

65.

An intermediary that pools and manages funds for many investors is called ______.

an investment company

a savings and loan

an investment banker

a commercial bank

66.

Financial institutions that specialize in assisting corporations in primary market transactions are called _______.

mutual funds

investment bankers

pension funds

globalization specialists

67.

When a pass-through mortgage security is issued, what does the issuing agency expect to receive?

The amount of the original loan plus a servicing fee

The principal and interest that are paid by the homeowner

The principal and interest that are paid by the homeowner, minus a servicing fee

The interest paid by the homeowner, plus a servicing fee

68.

In 2008 the largest corporate bankruptcy in U.S. history involved the investment banking firm of ______.

Goldman Sachs

Lehman Brothers

Morgan Stanley

Merrill Lynch

69.

The inability of shareholders to influence the decisions of managers, despite overwhelming shareholder support, is a breakdown in what process or mechanism?

Auditing

Public finance

Corporate governance

Public reporting

70.

Real assets are ______.

assets used to produce goods and services

always the same as financial assets

always equal to liabilities

claims on a company's income

71.

A major cause of mortgage market meltdown in 2007 and 2008 was linked to ________.

private equity investments

securitization

negative analyst recommendations

online trading

72.

In recent years the greatest dollar amount of securitization occurred for which type of loan?

Home mortgages

Credit card debt

Automobile loans

Equipment leasing

73.

Which of the following is (are) true about nonconforming mortgage loans?

They are also known as subprime loans.

They have higher default risk than conforming loans.

They were able to be offered without due diligence.

All of these options are true.

74.

The systemic risk that led to the financial crisis of 2008 was increased by _____.

collateralized debt obligations

subprime mortgages

credit default swaps

all of the options

75.

An investment adviser has decided to purchase gold, real estate, stocks, and bonds in equal amounts. This decision reflects which part of the investment process?

Asset allocation

Investment analysis

Portfolio analysis

Security selection

Chapter 2: ___________________________________________________________________________

Which of the following is not a money market instrument?

Treasury bill

Commercial paper

Preferred stock

Bankers' acceptance

T-bills are issued with initial maturities of: I. 4 weeks II. 16 weeks III. 26 weeks IV. 32 weeks

I and II only

I and III only

I, II, and III only

I, II, III, and IV

When computing the bank discount yield, you would use ____ days in the year.

260

360

365

366

A dollar-denominated deposit at a London bank is called _____.

eurodollars

LIBOR

fed funds

bankers' acceptance

Money market securities are sometimes referred to as cash equivalents because _____.

they are safe and marketable

they are not liquid

they are high-risk

they are low-denomination

The most marketable money market security is _____.

Treasury bills

bankers' acceptances

certificates of deposit

common stock

The minimum tick size, or spread between prices in the Treasury bond market, is

1/8 of a point.

1/16 of a point.

1/32 of a point.

1/64 of a point.

An investor in a T-bill earns interest by _________.

receiving interest payments every 90 days

receiving dividend payments every 30 days

converting the T-bill at maturity into a higher-valued T-note

buying the bill at a discount from the face value to be received at maturity

______ would not be included in the EAFE index.

Australia

Canada

France

Japan

10.

_____ is considered to be an emerging market country.

France

Norway

Brazil

Canada

11.

Which one of the following is a true statement?

Dividends on preferred stocks are tax-deductible to individual investors but not to corporate investors.

Common dividends cannot be paid if preferred dividends are in arrears on cumulative preferred stock.

Preferred stockholders have voting power.

Investors can sue managers for nonpayment of preferred dividends.

12.

The bid price of a Treasury bill is _________.

the price at which the dealer in Treasury bills is willing to sell the bill

the price at which the dealer in Treasury bills is willing to buy the bill

greater than the ask price of the Treasury bill expressed in dollar terms

the price at which the investor can buy the Treasury bill

13.

The German stock market is measured by which market index?

FTSE

Dow Jones 30

DAX

Nikkei

14.

Deposits of commercial banks at the Federal Reserve are called _____.

bankers' acceptances

federal funds

repurchase agreements

time deposits

15.

Which of the following is not a true statement regarding municipal bonds?

A municipal bond is a debt obligation issued by state or local governments.

A municipal bond is a debt obligation issued by the federal government.

The interest income from a municipal bond is exempt from federal income taxation.

The interest income from a municipal bond is exempt from state and local taxation in the issuing state.

16.

Which of the following is not a characteristic of a money market instrument?

Liquidity

Marketability

Low risk

Maturity greater than 1 year

17.

An individual who goes short in a futures position _____.

commits to delivering the underlying commodity at contract maturity

commits to purchasing the underlying commodity at contract maturity

has the right to deliver the underlying commodity at contract maturity

has the right to purchase the underlying commodity at contract maturity

18.

Which of the following is not a nickname for an agency associated with the mortgage markets?

Fannie Mae

Freddie Mac

Sallie Mae

Ginnie Mae

19.

Commercial paper is a short-term security issued by __________ to raise funds.

the Federal Reserve

the New York Stock Exchange

large well-known companies

all of these options

20.

The maximum maturity on commercial paper is _____.

270 days

180 days

90 days

30 days

21.

Which one of the following is a true statement regarding the Dow Jones Industrial Average?

It is a value-weighted average of 30 large industrial stocks.

It is a price-weighted average of 30 large industrial stocks.

It is a price-weighted average of 100 large stocks traded on the New York Stock Exchange.

It is a value-weighted average of all stocks traded on the New York Stock Exchange.

22.

Treasury bills are financial instruments issued by __________ to raise funds.

commercial banks

the federal government

large corporations

state and city governments

23.

Which of the following are true statements about T-bills? I. T-bills typically sell in denominations of $10,000. II. Income earned on T-bills is exempt from all federal taxes. III. Income earned on T-bills is exempt from state and local taxes.

I only

I and II only

I and III only

I, II, and III

24.

A bond that has no collateral is called a _________.

callable bond

debenture

junk bond

mortgage

25.

A __________ gives its holder the right to sell an asset for a specified exercise price on or before a specified expiration date.

call option

futures contract

put option

interest rate swap

26.

A T-bill quote sheet has 90-day T-bill quotes with a 4.92 bid and a 4.86 ask. If the bill has a $10,000 face value, an investor could buy this bill for _____.

$10,000

$9,878.50

$9,877

$9,880.16

27.

Which one of the following is a true statement regarding corporate bonds?

A corporate callable bond gives its holder the right to exchange it for a specified number of the company's common shares.

A corporate debenture is a secured bond.

A corporate convertible bond gives its holder the right to exchange it for a specified number of the company's common shares.

Holders of corporate bonds have voting rights in the company.

28.

The yield on tax-exempt bonds is ______.

usually less than 50% of the yield on taxable bonds

normally about 90% of the yield on taxable bonds

greater than the yield on taxable bonds

less than the yield on taxable bonds

29.

__________ is not a money market instrument.

A certificate of deposit

A Treasury bill

A Treasury bond

Commercial paper

30.

An investor buys a T-bill at a bank discount quote of 4.80 with 150 days to maturity. The investor's actual annual rate of return on this investment is _____.

4.8%

4.97%

5.47%

5.74%

31.

The U.K. stock index is the _________.

DAX

FTSE

GSE

TSE

32.

A __________ gives its holder the right to buy an asset for a specified exercise price on or before a specified expiration date.

call option

futures contract

put option

interest rate swap

33.

Which one of the following provides the best example of securitization?

Convertible bond

Call option

Mortgage pass-through security

Preferred stock

34.

Which of the following indexes are market value-weighted? I. The NYSE Composite II. The S&P 500 III. The Wilshire 5000

I and II only

II and III only

I and III only

I, II, and III

35.

The interest rate charged by large banks in London to lend money among themselves is called _________.

the prime rate

the discount rate

the federal funds rate

LIBOR

36.

A firm that has large securities holdings and wishes to raise money for a short length of time may be able to find the cheapest financing from which of the following? ��

Reverse repurchase agreement

Bankers' acceptance

Commercial paper

Repurchase agreement

37.

Currently, the Dow Jones Industrial Average is computed by _________.

adding the prices of 30 large "blue-chip" stocks and dividing by 30

calculating the total market value of the 30 firms in the index and dividing by 30

measuring the current total market value of the 30 stocks in the index relative to the total value on the previous day

adding the prices of 30 large "blue-chip" stocks and dividing by a divisor adjusted for stock splits and large stock dividends

38.

An investor purchases one municipal bond and one corporate bond that pay rates of return of 5% and 6.4%, respectively. If the investor is in the 15% tax bracket, his after-tax rates of return on the municipal and corporate bonds would be, respectively, _____.

5% and 6.4%

5% and 5.44%

4.25% and 6.4%

5.75% and 5.44%

39.

If a Treasury note has a bid price of $996.25, the quoted bid price in the Wall Street Journal would be _________.

99:25

99:63

99:20

99:08

40.

TIPS are ______.

Treasury bonds that pay no interest and are sold at a discount

U.K. bonds that protect investors from default risk

securities that trade on the Toronto stock index

Treasury bonds that protect investors from inflation

41.

The price quotations of Treasury bonds in the Wall Street Journal show a bid price of 102:12 and an ask price of 102:14. If you sell a Treasury bond, you expect to receive _________.

$1,024.75

$1,024.38

$1,023.75

$1,022.50

42.

The Dow Jones Industrial Average is _________.

a price-weighted average

a value weight and average

an equally weighted average

an unweighted average

43.

Investors will earn higher rates of returns on TIPS than on equivalent default-risk standard bonds if _______________.

inflation is lower than anticipated over the investment period

inflation is higher than anticipated over the investment period

the U.S. dollar increases in value against the euro

the spread between commercial paper and Treasury securities remains low

44.

Preferred stock is like long-term debt in that ___________.

it gives the holder voting power regarding the firm's management

it promises to pay to its holder a fixed stream of income each year

the preferred dividend is a tax-deductible expense for the firm

in the event of bankruptcy preferred stock has equal status with debt

45.

Which of the following does not approximate the performance of a buy-and-hold portfolio strategy?

An equally weighted index

A price-weighted index

A value-weighted index

All of these options (Weights are not a factor in this situation.)

46.

In calculating the Dow Jones Industrial Average, the adjustment for a stock split occurs _________.

automatically

by adjusting the divisor

by adjusting the numerator

by adjusting the market value weights

47.

Suppose the market prices of the 30 stocks in the Dow Jones Industrial Average all change by the same dollar amount on a given day. Assuming there are no stock splits, which stock will have the greatest impact on the average?

The one with the highest price

The one with the lowest price

All 30 stocks will have the same impact.

The answer cannot be determined from the information given.

48.

A bond issued by the state of Alabama is priced to yield 6.25%. If you are in the 28% tax bracket, this bond would provide you with an equivalent taxable yield of _________.

4.5%

7.25%

8.68%

none of these options

49.

The purchase of a futures contract gives the buyer _________.

the right to buy an item at a specified price

the right to sell an item at a specified price

the obligation to buy an item at a specified price

the obligation to sell an item at a specified price

50.

Ownership of a put option entitles the owner to the __________ to ___________ a specific stock, on or before a specific date, at a specific price.

right; buy

right; sell

obligation; buy

obligation; sell

51.

An investor in a 28% tax bracket is trying to decide whether to invest in a municipal bond or a corporate bond. She looks up municipal bond yields (rm) but wishes to calculate the taxable equivalent yield r. The formula she should use is given by ______.

r = rm × (1 - 28%)

r = rm/(1 - 72%)

r = rm × (1 - 72%)

r = rm/(1 - 28%)

52.

June call and put options on King Books Inc. are available with exercise prices of $30, $35, and $40. Among the different exercise prices, the call option with the _____ exercise price and the put option with the _____ exercise price will have the greatest value.

$40; $30

$30; $40

$35; $35

$40; $40

53.

Ownership of a call option entitles the owner to the __________ to __________ a specific stock, on or before a specific date, at a specific price.

right; buy

right; sell

obligation; buy

obligation; sell

54.

The ________ the ratio of municipal bond yields to corporate bond yields, the _________ the cutoff tax bracket at which more individuals will prefer to hold municipal debt.

higher; lower

lower; lower

higher; higher

The answer cannot be determined without more information.

55.

Which of the following types of bonds are excluded from most bond indexes?

Corporate bonds

Junk bonds

Municipal bonds

None of these options

56.

The Hang Seng index reflects market performance on which of the following major stock markets?

Japan

Singapore

Taiwan

Hong Kong

57.

The Standard & Poor's 500 is __________ weighted index.

an equally

a price-

a value-

a share-

58.

A firm that fails to pay dividends on its preferred stock is said to be _________.

insolvent

in arrears

insufferable

delinquent

59.

Large well-known companies often issue their own short-term unsecured debt notes directly to the public, rather than borrowing from banks; their notes are called _________.

certificates of deposit

repurchase agreements

bankers' acceptances

commercial paper

60.

Which of the following is most like a short-term collateralized loan?

Certificate of deposit

Repurchase agreement

Bankers' acceptance

Commercial paper

61.

Eurodollars are _________.

dollar-denominated deposits at any foreign bank or foreign branch of an American bank

dollar-denominated bonds issued by firms outside their home market

currency issued by Euro Disney and traded in France

dollars that wind up in banks as a result of money-laundering activities

62.

Which of the following is used to back international sales of goods and services?

Certificate of deposit

Bankers' acceptance

Eurodollar deposits

Commercial paper

63.

Treasury notes have initial maturities between ________ years.

2 and 4

5 and 10

10 and 30

1 and 10

64.

Which of the following is not a characteristic of common stock ownership?

Residual claimant

Unlimited liability

Voting rights

Limited life of the security

65.

If you thought prices of stock would be rising over the next few months, you might want to __________________ on the stock.

purchase a call option

purchase a put option

sell a futures contract

place a short-sale order

66.

A typical bond price quote includes all but which one of the following?

Daily high price for the bond

Closing bond price

Yield to maturity

Dividend yield

67.

What are business firms most likely to use derivative securities for?

Hedging

Speculating

Doing calculus problems

Market making

68.

What would you expect to have happened to the spread between yields on commercial paper and Treasury bills immediately after September 11, 2001?

No change, as both yields will remain the same

Increase, as the spread usually increases in response to a crisis

Decrease, as the spread usually decreases in response to a crisis

No change, as both yields will move in the same direction

69.

A stock quote indicates a stock price of $60 and a dividend yield of 3%. The latest quarterly dividend received by stock investors must have been ______ per share.

$0.55

$1.80

$0.45

$1.25

70.

Three stocks have share prices of $12, $75, and $30 with total market values of $400 million, $350 million, and $150 million, respectively. If you were to construct a price-weighted index of the three stocks, what would be the index value?

300

71.

Which of the following is not considered a money market investment?

Bankers' acceptance

Eurodollar

Repurchase agreement

Treasury note

72.

The Federal Reserve Board of Governors directly controls which of the following interest rates?

Bankers' acceptances

Brokers' calls

Federal funds

LIBOR

73.

You decide to purchase an equal number of shares of stocks of firms to create a portfolio. If you wanted to construct an index to track your portfolio performance, your best match for your portfolio would be to construct ______.

a value-weighted index

an equally weighted index

a price-weighted index

a bond price index

74.

In a ___________ index, changes in the value of the stock with the greatest market value will move the index value the most, everything else equal.

value-weighted index

equally weighted index

price-weighted index

bond price index

75.

A corporation in a 34% tax bracket invests in the preferred stock of another company and earns a 6% pretax rate of return. An individual investor in a 15% tax bracket invests in the same preferred stock and earns the same pretax return. The after-tax return to the corporation is _______, and the after-tax return to the individual investor is _______.

3.96%; 5.1%

5.39%; 5.1%

6%; 6%

3.96%; 6%

76.

All but which one of the following indices is value weighted?

NASDAQ Composite

S&P 500

Wilshire 5000

DJIA

77.

What is the tax exempt equivalent yield on a 9% bond yield given a marginal tax rate of 28%?

6.48%

7.25%

8.02%

78.

A tax free municipal bond provides a yield of 3.2%. What is the equivalent taxable yield on the bond given a 35% tax bracket?

3.2%

3.68%

4.92%

79.

An index computed from a simple average of returns is a/an _____.

equal weighted index

value weighted index

price weighted index

share weighted index

80.

A tax free municipal bond provides a yield of 2.34%. What is the equivalent taxable yield on the bond given a 28% tax bracket?

2.34%

2.68%

3.25%

4.92%

81.

The Chompers Index is a price weighted stock index based on the 3 largest fast food chains. The stock prices for the three stocks are $54, $23, and $44. What is the price weighted index value of the Chompers Index?

23.43

35.36

40.33

49.58

82.

The Hydro Index is a price weighted stock index based on the 5 largest boat manufacturers in the nation. The stock prices for the five stocks are $10, $20, $80, $50 and $40. The price of the last stock was just split 2 for 1 and the stock price was halved from $40 to $20. What is the new divisor for a price weighted index?

5.00

4.85

4.50

4.75

83.

A benchmark index has three stocks priced at $23, $43, and $56. The number of outstanding shares for each is 350,000 shares, 405,000 shares, and 553,000 shares, respectively. If the market value weighted index was 970 yesterday and the prices changed to $23, $41, and $58, what is the new index value?

960

970

975

985

84.

A benchmark market value index is comprised of three stocks. Yesterday the three stocks were priced at $12, $20, and $60. The number of outstanding shares for each is 600,000 shares, 500,000 shares, and 200,000 shares, respectively. If the stock prices changed to $16, $18, and $62 today respectively, what is the 1-day rate of return on the index?

5.78%

4.35%

6.16%

7.42%

85.

Which of the following mortgage scenarios will benefit the homeowner the most?

Adjustable rate mortgage when interest rate increases.

Fixed rate mortgage when interest rates falls.

Fixed rate mortgage when interest rate rises.

None of these options, as the banker's interest will always be protected.

86.

The TED spread refers to

the difference between the Treasury bond rate and the Treasury bill rate.

the difference between the Treasury note rate and the Treasury bill rate.

the difference between the LIBOR rate and the Treasury bill rate.

the difference between the LIBOR rate and the Treasury bond rate.

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Week 2 Discussion

Please discuss this important but only 2 minute video, and how it can relate to our class. ---Dr. Robert Reich, former Secretary of Labor under President Bill Clinton, professor, author and speaker ---Robert Reich-What is wrong with economy in a little over 2 minutes! http://www.youtube.com/watch?v=JTzMqm2TwgE

Please discuss as related to managerial economics--Wealth Inequality http://www.youtube.com/watch?v=QPKKQnijnsM

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Individuals and Government

True/False Questions

1. On average, persons in the United States devote more of their annual budgets to taxes than they do to food.

2. A universally observed function of government is the establishment of property rights.

3. The total share of GDP accounted for by government spending in the United States has declined significantly since 1980.

4. In 1929, the federal government spent more than was spent by state and local governments.

5. Since 1930, the percent of GDP devoted to government expenditures has more than tripled.

6. The costs imposed by government regulations on business firms are included in budget data on government expenditures.

7. Government consumption does not require resources to be reallocated from private to government use.

8. Since 1959, the percent of federal government expenditures devoted to transfers has increased by more than 50 percent.

9. Transfer payments, including Social Security and welfare and medical assistance, account for nearly 60 percent of federal government expenditures.

10. Interest on the federal government’s debt accounts for about 20 percent of federal government expenditure.

11. Federal grants-in-aid to state and local governments finance about 20 percent of annual spending by these governments.

12. The federal government allocates about 10 percent of its budget to Social Security.

13. State and local governments in the United States spend a bit more than one-third of their budgets on education.

14. Sales taxes account for about 22 percent of state and local government revenue in the United States.

15. The federal government obtains about half of its revenue annually from retail sales taxes.

16. State governments do not fund any part of Medicaid.

17. The social compact is an 18th century idea by political theorists.

18. The proportion of revenue received by the federal government from payroll taxes is higher than the proportion of revenue received by state and local governments from payroll taxes.

Multiple Choice Questions

1. The real cost of government goods and services is:

a. money.

b. taxes.

c. the private goods and services foregone.

d. inflation.

2. If the economy is currently operating on a point on the production possibility curve for government goods and services versus private goods and services,

a. an annual increase in government goods and services can be obtained without any sacrifice of annual private goods and services.

b. it will be impossible to increase annual output of government goods and services.

c. a decrease in the annual output of government goods and services will have no effect on the annual output of private goods and services.

d. a decrease in the annual output of government goods and services will allow an increase in annual output of private goods and services.

3. Government goods and services are usually:

a. not rationed by prices.

b. sold in markets.

c. made available to persons according to their willingness and ability to pay.

d. financed by revenue obtained from sales.

4. Taxes:

a. are prices paid for the right to consume government goods and services.

b. are compulsory payments not directly related to the benefits received from government goods and services.

c. never affect economic incentives.

d. are used by private firms to raise revenue.

5. A mixed economy is one in which:

a. there are no markets.

b. government activity accounts for a significant proportion of the value of goods and services produced.

c. there is no government.

d. all goods and services are sold in markets.

6. Government purchases for consumption and investment:

a. are made to acquire resources necessary to producegovernment goods and services.

b. are designed to redistribute purchasing power among citizens.

c. have increased in importance as a percent of federal spending since 1959.

d. do not withdraw resources from private use.

7. Transfer payments by the federal government in the United States account for about:

a. 25 percent of federal government expenditures.

b. 10 percent of federal government expenditures.

c. 40 percent of GDP.

d. 60 percent of federal government expenditures.

8. Total annual expenditures by federal, state, and local governments in the United States in the 1990s accounted for roughly:

a. 20 percent of annual GDP.

b. 30 percentof annual GDP.

c. 50 percentof annual GDP.

d. 75 percent of annual GDP.

9. Federal government expenditures in the United States account for about:

a. 23 percent of annual GDP.

b. 33 percent of annual GDP.

c. 43 percent of annual GDP.

d. 53 percent of annual GDP.

10. About 80 percent of federal receipts are accounted for by:

a. corporate profits taxes.

b. sales taxes.

c. excise taxes.

d. payroll and personal income taxes.

11. If the economy is operating at full employment and using resources efficiently, then an increase in spending for homeland security this year will:

a. require that resources be reallocated to homeland security services without sacrificing any alternative goods and services.

b. be possible if resources are reallocated to homeland security services, but it will also mean that the output of some other goods and services will have to fall.

c. be impossible.

d. be possible only if there is an improvement in technology or more resources made available.

12. Which of the following is an example of a political institution?

a. a market

b. elections with winners determined by majority rule

c. representative government

d. both (b) and (c)

13. Nonmarket rationing means that:

a. those willing to pay can buy as much of a product as they choose.

b. prices are used to sell products.

c. goods and services are not rationed by prices.

d. willingness to pay is not a factor in determining who can enjoy a good or service.

e. both (c) and (d)

14. The U.S. economy is best characterized as a:

a. pure market economy.

b. socialist economy.

c. pure capitalistic, free-enterprise system.

d. mixed economy.

15. State and local government expenditure in the United States accounts for about:

a. 32 percent of GDP.

b. 22 percent of GDP.

c. 12 percent of GDP.

d. 7 percent of GDP.

16. Following the circular flow of a mixed economy, firms receive a flow of dollars from and send goods and services to:

a. Output Markets.

b. Input Markets.

c. Households.

d. Government.

17. Following the circular flow of a mixed economy, which entity or entities distribute resources?

a. Firms only.

b. Input Markets only.

c. Government and Households.

d. Households and Input Markets.

18. When has the U.S. experienced government expenditures in the range of 40% to 50% of GDP?

a. 2000 to 2009.

b. 1950 to 1959.

c. 1940 to 1949.

d. It has never happened.

19. In 2008, which country listed below has the highest percentage of government spending relative to GDP?

a. France.

b. Ireland.

c. Japan.

d. Canada.

20. The old-age dependency ratio is:

a. the proportion of the population that is 60 years or older over the proportion of the population that is less than 60 years of age.

b. the proportion of the population that is 65 years or older over the proportion of the population that is 15 to 64 years of age.

c. the proportion of the population that is 70 years or older over the proportion of the population that is 20 to 69 years of age.

d. the total government expenditure on programs for the elderly over the number of citizens that are 65 years or older.

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Chapter 1

Current Multinational Challenges and the Global Economy

True/False

1) BRICs is a term used in international finance to represent assets that are considered to be inexpensive and sturdy, but fundamentally unsound and and incapable of coping with the upheavals now apparent in international financial markets.

2) Multinational enterprises (MNEs) are firms, both for profit companies and not-for-profit organizations, that have operations in more than one country, and conduct their business through foreign subsidiaries,

branches, or joint ventures with host country firms.

3) Ownership, control, and governance changes radically across the world. The publicly traded company is not the dominant global business organization—the privately held or family-owned business is the prevalent structure—and their goals and measures of performance differ dramatically.

Multiple Choice

1) A well-established, large U.S.-based MNE will probably NOT be able to overcome which of the following obstacles to maximizing firm value?

A) an open market place

B) high quality strategic management

C) access to capital

D) none of the above

2) A well-established, large China-based MNE will probably be most adversely affected by which of the following elements of firm value?

A) an open marketplace

B) high-quality strategic management

C) access to capital

D) access to qualified labor pool

3) A well-established, large, Brazil-based MNE will probably be most adversely affected by which of the following elements of firm value?

A) an open marketplace

B) high-quality strategic management

C) access to capital

D) access to qualified labor pool

True/False

1) Comparative advantage is one of the underlying principles driving the growth of global business.

2) Your authors suggest that one way to characterize the global financial marketplace is through its assets, institutions, and linkages.

3) Eurocurrencies are domestic currencies of one country on deposit in a second country.

4) A eurodollar deposit is a demand deposit.

5) Eurocurrency markets serve two valuable purposes: 1) Eurocurrency deposits are an efficient and convenient money market device for holding excess corporate liquidity; and 2) the Eurocurrency market is a major source of short-term bank loans to finance corporate working capital needs, including the financing of imports and exports.

6) The key factor attracting both depositors and borrowers to the Eurocurrency loan market is the narrow interest rate spread within that market.

7) The Eurocurrency market continues to thrive because it is a large international money market relatively free from governmental regulation and interference. Recent events may lead to greater regulation.

Essay

1) List and explain three strategic motives why firms become multinationals and give an example of each.

Multiple Choice

1) The theory that suggests specialization by country can increase worldwide production is:

A) the theory of comparative advantage.

B) the theory of foreign direct investment.

C) the international Fisher effect.

D) the theory of working capital management.

2) Which of the following is NOT a reason governments interfere with comparative advantage?

A) Governments attempt to achieve full employment.

B) Governments promote economic development.

C) national self-sufficiency in defense-related industries

D) All are reasons governments interfere with comparative advantage.

3) Which of the following factors of production DO NOT flow freely between countries?

A) raw materials

B) financial capital

C) (non-military) technology

D) All of the above factors of production flow freely among countries.

4) Which of the following would NOT be a way to implement comparative advantage?

A) IBM exports computers to Egypt.

B) Computer hardware is designed in the United States but manufactured and assembled in Korea.

C) Water of the greatest purity is obtained from wells in Oregon, bottled, and exported worldwide.

D) All of the above are examples of ways to implement comparative advantage.

5) Of the following, which would NOT be considered a way that government interferes with comparative advantage?

A) tariffs

B) managerial skills

C) quotas

D) other non-tariff restrictions

True/False

1) The theory of comparative advantage owes it origins to Ben Bernanke as described in his book The Wealth of Bankers.

2) International trade might have approached the comparative advantage model in the 19th century, and it does so even more today.

3) Comparative advantage shifts over time as less developed countries become more developed and realize their latent opportunities.

4) Comparative advantage in the 21st century is based more on services and their cross border facilitation by telecommunications and the Internet.

5) Comparative advantage was once the cornerstone of international trade theory, but today it is archaic, simplistic, and irrelevant for explaining investment choices made by MNEs.

6) When discussing comparative advantage, it is apparent that today at least two of the factors of production, capital and technology, now flow directly and easily between countries, rather than only indirectly through traded goods and services.

7) It would be safe to make the statement that modern telecommunications now take business activities to labor rather than moving labor to the places of business.

Multiple Choice

1) Which of the following domestic financial instruments have NOT been modified for use in international financial management?

A) currency options and futures

B) interest rate and currency swaps

C) letters of credit

D) All of the above are domestic financial instruments that have also been modified for use in international financial markets.

True/False

1) MNEs must modify finance theories like cost of capital and capital budgeting because of foreign complexities.

2) Relative to MNEs, purely domestic firms tend to have GREATER political risk.

3) Domestic firms tend to make GREATER use of financial derivatives than MNEs because they can bear the greater risk presented by these financial instruments.

4) Because countries have different financial regulations and customs, it is common for MNEs to apply their domestic rules and regulations when doing financial business in a foreign country.

5) A number of financial instruments that are used in domestic financial management have been modified for use in international financial management. Examples are foreign currency options and futures, interest rate and currency swaps, and letters of credit.

Multiple Choice

1) In determining why a firm becomes multinational there are many reasons. One reason is that the firm is a market seeker. Which of the following is NOT a reason why market-seeking firms produce in foreign countries?

A) satisfaction of local demand in the foreign country

B) satisfaction of local demand in the domestic markets

C) political safety and small likelihood of government expropriation of assets

D) All of the above are market-seeking activities.

2) ________ investments are designed to promote and enhance the growth and profitability of the firm. ________ investments are designed to deny those same opportunities to the firm's competitors.

A) Conservative; Aggressive

B) Defensive; Proactive

C) Proactive; Defensive

D) Aggressive; Proactive

True/False

1) For firms competing in a world characterized by oligopolistic competition, strategic motives can be subdivided into proactive and defensive investments.

2) Defensive measures are designed to enhance growth and profitability of the firm itself.

Multiple Choice

1) The phase of the globalization process characterized by imports from foreign suppliers and exports to foreign buyers is called the:

A) domestic phase.

B) multinational phase.

C) international trade phase.

D) import-export banking phase.

2) The authors describe the multinational phase of globalization for a firm as one characterized by the:

A) ownership of assets and enterprises in foreign countries.

B) potential for international competitors or suppliers even though all accounts are with domestic firms and are denominated in dollars.

C) imports from foreign suppliers and exports to foreign buyers.

D) requirement that all employees be multilingual.

3) A firm in the International Trade Phase of Globalization:

A) makes all foreign payments in foreign currency units and all foreign receipts in domestic currency units.

B) receives all foreign receipts in foreign currency units and makes all foreign payments in domestic currency units.

C) bears direct foreign exchange risk.

D) none of the above

4) Of the following, which was NOT mentioned by the authors as an increase in the demands of financial management services due to increased globalization by the firm?

A) evaluation of the credit quality of foreign buyers and sellers

B) foreign consumer method of payment preferences

C) credit risk management

D) evaluation of foreign exchange risk

5) Of the following, which was NOT mentioned by the authors as an increase in the demands of financial management services due to increased globalization by the firm?

A) evaluation of the credit quality of foreign buyers and sellers

B) foreign consumer method of payment preferences

C) credit risk management

D) evaluation of foreign exchange risk

6) The authors describe the multinational phase of globalization for a firm as one characterized by the:

A) ownership of assets and enterprises in foreign countries.

B) potential for international competitors or suppliers even though all accounts are with domestic firms and are denominated in dollars.

C) imports from foreign suppliers and exports to foreign buyers.

D) requirement that all employees be multilingual.

7) The twin agency problems limiting financial globalization are caused by these two groups acting in their own self-interests rather than the interests of the firm.

A) rulers of sovereign states and unsavory customs officials

B) corporate insiders and attorneys

C) corporate insiders and rulers of sovereign states

D) attorneys and unsavory customs officials

True/False

1) Typically, a firm in its domestic stage of globalization has all financial transactions in its domestic currency.

2) Typically, a "greenfield" investment abroad is considered a greater foreign investment having a greater foreign presence than a joint venture with a foreign firm.

3) The authors argue that financial inefficiency caused by influential insiders may prove to be an increasingly troublesome barrier to international finance.

4) The authors describe a process for development of a MNE that begins with a purely domestic phase, followed by the multinational phase, and topping out with the international trade phase.

5) Today it is widely assumed that there are NO LIMITS to financial globalization.

6) The growth in the influence and self-enrichment of organizational insiders is seen as an impediment to the growth of financial globalization in general.

7) The actions of corporate insiders and the actions of rulers of sovereign states are both agency costs that act as an impediment to the growth of globalization.

Chapter 2 Corporate Ownership, Goals, and Governance

Multiple Choice

1) Foreign stock markets are frequently characterized by controlling shareholders for the individual publicly traded firms. Which of the following is NOT identified by the authors as typical controlling shareholders?

A) the government (for example, privatized utilities)

B) institutions (such as banks in Germany)

C) family (such as in France)

D) All of the above were identified by the authors as controlling shareholders.

2) Which of the following is NOT typically associated with the public ownership of business organizations?

A) the state

B) the government

C) families

D) civil society

3) Which of the following is NOT typically associated with the private ownership of business organizations?

A) the government

B) families

C) individuals

D) publicly traded, widely-held organizations

4) State Owned Enterprises (SOEs):

A) are a form of public ownership.

B) are created for commercial activities rather than civil or social activities.

C) are the dominant form of business organization in some countries.

D) are all of the above.

5) The problems that may arise due to the separation of ownership and management in large business organizations is know as:

A) separation anxiety.

B) the agency problem.

C) corporate disconnect theory.

D) none of the above

6) Privatization is a term used to describe:

A) firms that are purchased by the government.

B) government operations that are purchased by corporations and other investors.

C) firms that do not use publicly available debt.

D) non-public meetings held by members of interlocking directorates.

True/False

1) In the U.S. and U.K. stock markets are characterized by ownership of firms concentrated in the hands of a few controlling shareholders. In contrast, the rest of the world tends to have more widespread ownership of shares.

2) State Owned Enterprises (SOEs) by their very name cannot be traded on stock exchanges because they are government owned.

3) In recent years the trend has been for markets to increasing focus on the shareholder wealth form of wealth maximization.

4) Non-Anglo-American markets are dominated by the "one-vote-one-share" rule.

5) According to recent research, family-owned firms in some highly-developed economies typically outperform publicly-owned firms.

Essay/Short Answer

1) What are the most important distinctions that make state owned enterprises (SOEs) different from other forms of government organizations?

Multiple Choice

1) "Maximize corporate wealth":

A) is the primary objective of the non-Anglo-American model of management.

B) as a management objective treats shareholders on a par with other corporate stakeholders such as creditors, labor, and local community.

C) has a broader definition than just financial wealth.

D) all of the above

2) The Shareholder Wealth Maximization Model (SWM):

A) combines the interests and inputs of shareholders, creditors, management, employees, and society.

B) is being usurped by the Stakeholder Capitalism Model as those types of MNEs dominate their global industry segments.

C) clearly places shareholders as the primary stakeholder.

D) is the dominant form of corporate management in the European-Japanese governance system.

3) The Stakeholder Capitalism Model (SCM):

A) clearly places shareholders as the primary stakeholder.

B) combines the interests and inputs of shareholders, creditors, management, employees, and society.

C) has financial profit as its goal and is often termed impatient capital.

D) is the Anglo-American model of corporate governance.

4) In the Anglo-American model of corporate governance, the primary goal of management is to:

A) maximize the wealth of all stakeholders.

B) maximize shareholder wealth.

C) minimize costs.

D) minimize risk.

5) In finance, an efficient market is one in which:

A) prices are assumed to be correct.

B) prices adjust quickly and accurately to new information.

C) prices are the best allocators of capital in the macro economy.

D) all of the above

6) Systematic risk can be defined as:

A) the total risk to the firm.

B) the risk of the individual security.

C) the risk of the market in general.

D) the risk that can be systematically diversified away.

7) Unsystematic risk can be defined as:

A) the total risk to the firm.

B) the risk of the individual security.

C) the added risk that a firm's shares bring to a diversified portfolio.

D) the risk of the market in general.

8) The study of how shareholders can motivate management to accept the prescriptions of the shareholder wealth maximization model is called:

A) market efficiency.

B) the SWM model.

C) agency theory.

D) the SCM model.

9) Under the Shareholder Wealth Maximization Model (SWM) of corporate governance, poor firm performance is likely to be faced with all but which of the following?

A) sale of shares by disgruntled current shareholders

B) shareholder activism to attempt a change in current management

C) as a maximum threat, initiation of a corporate takeover

D) prison time for executive management

10) Which of the following is a reason why managers act to maximize shareholder wealth in Anglo-American markets?

A) the use of stock options to align the goals of shareholders and managers

B) the market for corporate control that allows for outside takeover of the firm

C) performance based compensation for executive management

D) all of the above

11) Which of the following is NOT true regarding the stakeholder capitalism model?

A) Banks and other financial institutions are less important creditors than securities markets.

B) Labor unions are more powerful than in the Anglo-American markets.

C) Governments interfere more in the marketplace to protect important stakeholder groups.

D) All of the above are TRUE.

12) The stakeholder capitalism model:

A) typically avoids the flaw of impatient capital.

B) tries to meet the desires of multiple stakeholders.

C) may leave management without a clear signal about tradeoffs among the several stakeholders.

D) all of the above

13) Which of the following is generally NOT considered to be a viable operational goal for a firm?

A) maintaining a strong local currency

B) maximization of after-tax income

C) minimization of the firm's effective global tax burden

D) correct positioning of the firm's income, cash flows and available funds as to country and currency

14) Which of the following operational goals for the international firm may be incompatible with the others?

A) maintaining a strong local currency

B) maximization of after-tax income

C) minimization of the firm's effective global tax burden

D) Each of these goals may be incompatible with one or more of the others.

15) The primary operational goal for the firm is to:

A) maximize after-tax profits in each country where the firm is operating.

B) minimize the total financial risk to the firm.

C) maximize the consolidated after-tax profits of the firm.

D) maximize the total risk to the firm.

16) Which of the following broad topics is NOT identified as an area to be established as good corporate governance practice by the Organization for Economic Cooperation and Development (OECD)?

A) protect the rights of shareholders

B) disclosure and transparency

C) the proper role of stakeholders in the governance of the firm

D) All of the above should be a concern of good corporate governance.

17) The relationship among stakeholders used to determine and control the strategic direction and performance of an organization is termed:

A) corporate governance.

B) Anglo-American activism.

C) capital structure.

D) working capital management.

18) When discussing the structure of corporate governance, the authors distinguish between internal and external factors. ________ is an example of an internal factor, and ________ is an example of an external factor.

A) Equity markets; executive management

B) Debt markets; board of directors

C) Executive management; auditors

D) Auditors; regulators

19) Which of the following is NOT commonly associated with a government affiliated form of corporate governance regime?

A) no minority influence

B) lack of transparency

C) state ownership of enterprise

D) All are associated with this type of corporate governance regime.

20) Generally speaking, which of the following is NOT considered an important factor in the composition and control of corporate boards of directors?

A) the number of insider vs outside directors

B) the total number of directors on the board

C) the composition of the compensation committee

D) All of the above are important factors of board composition.

21) Signed into law on July 30, 2002, the ________ Act requires CEOs of publicly traded companies to vouch for the veracity of the firm's published financial statements.

A) Smoot-Hawley

B) Humphrey-Hawkins

C) McCain-Merrill

D) Sarbanes-Oxley

22) The Sarbanes-Oxley Act, passed by the U.S. Congress in July 2002, was designed to:

A) reinstitute heavy tariffs on international trade.

B) reform corporate governance.

C) limit the Federal Reserve Board's ability to engage in the buying and selling of gold.

D) limit trade with countries deemed lenient on terrorism.

23) Anglo-American markets is a term used to describe business markets in:

A) North, Central, and South America.

B) the United States, Canada, and Western Europe.

C) the United States, United Kingdom, Canada, Australia and New Zealand.

D) the United States, France, Britain, and Germany.

24) The deliberation of the of the process demonstrated in the European-Japanese system of corporate governance has sometimes been termed:

A) socialism.

B) impatient capital.

C) patient capital.

D) communism.

25) With shareholder wealth maximization as the manager's goal, capital may be termed:

A) impatient.

B) patient.

C) borrowed.

D) bought.

26) Which of the following is NOT an important concept when distinguishing between international and domestic financial management?

A) corporate governance

B) culture, history, and institutions

C) political risk

D) All of the above are important distinguishing concepts.

27) The Board of Directors:

A) consists exclusively of the officers of the corporation.

B) is the legal body which is accountable for the governance of the corporation.

C) are not subject to the external forces of the marketplace.

D) is appointed by the Securities and Exchange Commission (SEC).

28) If share price rises from $12 to $15 per share, and pays a dividend of $1 per share, what was the rate of return to shareholders?

A) 26.67%

B) -13.33%

C) 33.33%

D) 16.67%

29) PolyProduction Inc. has two classes of common stock. Class A has 5 million shares with 10 votes per share. Class B has 5 million shares with 1 vote per share. If the dividends per share are equal for both class A and B stock, then Class A shareholders have ________ of the votes and ________ of the dividends.

A) 90.91%; 90.91%

B) 90.91%; 50.00%

C) 50.00%; 50.00%

D) 83.33%; 33.33%

30) The number of publicly traded firms:

A) peaked in the U.S. in 1996.

B) peaked worldwide in 1996.

C) increased significantly in 2009 as a result of the international financial crisis.

D) all of the above

31) Which of the following is NOT a possible and appropriate response by shareholders dissatisfied with existing firm management of a publicly traded firm?

A) Shareholders could sell their shares of stock.

B) Shareholders could remain quietly disgruntled.

C) Shareholders, perhaps with the help of others, could attempt to initiate a takeover.

D) All of these responses may be possible and appropriate.

True/False

1) The stakeholder capitalism model (SCM) holds that total risk (operational and financial) is more important than just systematic risk.

2) In recent years the trend has been for markets to increasing focus on the shareholder wealth form of wealth maximization.

3) Patient Capitalism is characterized by short-term focus by both management and investors.

4) Agency theory states that unsystematic risk can be eliminated through diversification.

5) The stakeholder capitalism model does not assume that equity markets are either efficient or inefficient.

6) The stakeholder capitalism model assumes that only systematic risk "counts" or is a prime concern for management.

7) Dividend yield is the change in the share price of stock as traded in the public equity markets.

8) Regarding comparative corporate governance regimes: Bank-based regimes characterized by government influence in bank lending and a lack of transparency is often found in countries such as Korea and Germany.

9) Investor protection is typically better in countries with codified civil law (the Code Napoleon) than in countries with a legal system based in English common law.

10) The relatively low cost of compliance with the Sarbanes-Oxley Act (SOX) has been a surprising benefit of the act.

11) According to recent research, family-owned firms in some highly-developed economies typically outperform publicly-owned firms.

12) The goal of all international corporations is to maximize shareholder wealth.

13) Systematic risk can be eliminated through portfolio diversification.

14) According to the authors, dual classes of voting stock are the norm in non-Anglo-American markets.

15) A recent study shows that privately held firms use less financial leverage and enjoy lower costs of debt than publicly traded firms.

16) U.S. listings of publicly traded firms as a percentage of worldwide listings of such firms INCREASED from 11% in 1996 to approximately 33% in 2010.

17) Having Anglo-Americans as members of the board of directors of a non-Anglo-American firm signals poor corporate governance in the firm.

18) In the stakeholder capitalism model (SCM) the assumption of market efficiency is absolutely critical.

Short Answer/ Essay

1) Describe the management objectives of a firm governed by the shareholder wealth maximization model and one governed by the stakeholder wealth maximization model. Give an example of how these two models may lead to different decision-making by executive management.

2) Define patient and impatient capitalism and discuss how each may lead to different decision-making in the shareholder wealth maximization model.

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ECO 405 Week 2 Quiz – Strayer NEW

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Chapter 01

Alleviating Human Misery: The Role Of Economic Reasoning

Multiple Choice Questions

1. The Fundamental Economic Problem Is A. Inflation B. That Resources Are Scarce Relative To Wants C. Supply And Demand D. How To Make More Money E. Unemployment

2. Which Of The Follow Best Describes Human Wants And Desires? They A. Are Unlimited In The Aggregate B. Stop After A Person Attains The Things Necessary For Life C. Do Not Include "Extras" Like Variety D. Are Not Affected By What Others Have E. Do Not Change Once We Attain Our Desired Set Of Goods

3. The Means For Satisfying Wants Are A. Insatiable B. Unlimited C. Infinite D. Scarce E. Unavailable

4. Economic Reasoning Would Not Be Necessary If A. Our Wants Were Limited B. Resources Were Expansive C. Scarcity Were Decreased D. We Could Have Everything We Wanted E. Politicians Were Better At Running The Economy

5. A Three-Year-Old Learns About The Fundamental Economic Problem When She A. Gets Presents For Her Birthday B. Is Punished For Drawing On The Walls C. Has To Eat Green Beans For Dinner D. Is Told She Can't Have A Toy At The Store E. Watches Her Favorite Cartoon

6. Which Of The Following Is The Primary Goal Of An Economy? A. Maximizing Economic Growth B. Minimizing Unemployment C. Minimizing The Effects Of Scarcity D. Minimizing The National Debt E. Maximizing Gdp

7. The Fundamental Economic Problem Involves A. Overpopulation B. Inflation And Unemployment C. Scarce Resources And Unlimited Wants D. Cheap Foreign Labor E. Supply And Demand

8. Labor Resources Include A. The Equipment Workers Use To Complete Their Work B. Only Non-Management Personnel C. Any Efforts Of A Person To Produce Goods D. Only The Physical Efforts Of An Economy's People E. All Of The Above

9. Which Of The Following Is An Example Of A Capital Resource? A. A Firm's Employee B. Money In A Firm's Bank Account C. Agricultural Land D. A Worker's Productivity E. All Of The Above

10. Which Of The Following Is Not An Example Of A Capital Resource? A. Forests B. A Printing Press C. Semi-Finished Materials D. A Computer Technician E. Inventories

11. The Know-How And The Means And Methods Of Production Available In An Economy Are Known As A. Technology B. Capital C. Human Capital D. Labor E. Management

12. Which Of The Following Is Not A Capital Resource? A. Land B. Stocks And Bonds C. Buildings D. Tools E. Mineral Deposits

Questions 13 - 17 Refer To The Graph Below.

13. Given Production Possibilities Curve (A), Point N Suggests That A. The Economy Is Attaining Full Employment, But Not Full Production B. The Economy Is Attaining Full Production, But Not Full Employment C. The Economy Is Using Its Available Resources Inefficiently D. The Economy Is Attaining Both Full Employment And Full Production E. Point N Is Unattainable

14. The Movement From Curve (A) To Curve (B) Suggests A. A Movement From Unemployment To Full Employment B. An Improvement In Capital Good Technology, But Not In Consumer Good Technology C. An Improvement In Consumer Good Technology, But Not In Capital Good Technology D. A Decline In The Total Output Of Society E. The Society Becomes Worse Off

15. At Which Of The Following Points Is The Economy Producing Efficiently? A. Q B. G C. N D. B E. E

16. If The Economy Were Producing Combination G Initially, The Cost Of Producing Additional Bd Units Of Capital Goods Is The Value Of A. The Resources Used In Producing Od Of Capital Goods B. The Resources Used In Producing Ef Of Consumer Goods C. The Resources Used In Producing Oe Of Consumer Goods D. Bd Units Of Capital Goods E. Bd Units Of Consumer Goods

17. Given Production Possibilities Curve (B), Point Q A. Can Be Reached Through An Improvement In Technology B. Represents Some Degree Of Inefficiency In The Use Of Resources C. Can Be Reached If The Birth Rate Is Reduced D. Can Be Reached If The Output Of Consumer Goods Is Increased While The Output Of Capital Goods Is Reduced E. Is Undesirable

18. The Bow Shape Of The Production Possibilities Curve Reflects A. The Opportunity Cost Concept B. The Concept Of Increasing Opportunity Costs C. The Concept Of Diminishing Marginal Returns D. The Marginal Social Cost/Marginal Social Benefit Principle E. None Of The Above

19. A Production Possibilities Curve Represents All Of An Economy's Combinations For Production That Are A. Possible B. Efficient C. Attainable D. Inefficient E. Desirable

20. If An Economy Is Experiencing Unemployment, It Is Operating At A Point A. On Its Ppc B. Below Its Ppc C. Beyond Its Ppc D. At The Horizontal Intercept Of Its Ppc E. At The Vertical Intercept Of Its Ppc

21. A Point On A Country's Ppc That Can Not Be Reached, Given The Current Situation, Is A. On Its Ppc B. Below Its Ppc C. Beyond Its Ppc D. At The Horizontal Intercept Of Its Ppc E. At The Vertical Intercept Of Its Ppc

22. The Negative Slope Of A Ppc Illustrates A. Limited Wants B. Unlimited Wants C. The Law Of Increasing Opportunity Cost D. Scarcity E. Unlimited Resources

Questions 23 - 27 Refer To The Graph Below.

23. Which Point Does Not Represent Efficient Production For Sharpland In 2007? A. A B. B C. C D. D E. E

24. Which Of The Following Points Is Unattainable For Sharpland In 2012? A. A B. G C. F D. D E. H

25. In 2007, Sharpland Can Increase Its Production Of Food Without Decreasing Its Production Of Education By Moving From Point A. C To D B. C To E C. D To A D. E To B E. E To G

26. Which Of The Following Best Explains The Shift Of Sharpland's Ppc Between 2007 And 2012? An Increase In A. The Number Of Tractors B. General Technology C. Agricultural Land Resources D. The Quality And Quantity Of Teachers E. The Demand For Schooling

27. A Movement From Point G To Point E In 2012 Is Optimal Only If A. People In Sharpland Like Education More Than Food B. People In Sharpland Like Food More Than Education C. The Msc > Msb D. The Msc < Msb E. Point C Is Not An Option

Questions 28 - 31 Refer To The Graph Below.

28. For Mary Ann, The Opportunity Cost Of 100 Coconut Cream Pies Is Equal To How Many Grass Huts? A. 5 B. 10 C. 20 D. 100 E. 120

29. Mary Ann's Straight Line Ppc Indicates That The Opportunity Cost Of Coconut Cream Pies Is A. Increasing B. Decreasing C. Constant D. 100 E. 0

30. Which Of The Following Would Allow Mary Ann To Produce 110 Coconut Cream Pies? A. Decrease In Production Of Grass Huts B. An Improvement In Her Means And Methods Of Pie Production C. A Decrease In The Resources Used For Making Grass Huts D. Putting All Of Her Resources Into Producing Coconut Cream Pies E. Finding A Better Way To Produce Grass Huts

31. If Mary Ann Decides To Swim In The Lagoon In The Afternoon, Instead Of Working, She Will Move To A Point A. Beyond Her Ppc B. Below Her Ppc C. Higher On Her Ppc D. Lower On Her Ppc E. Off The Ppc Graph

32. If Education And Food Are The Two Goods That Society Can Produce, An Increase In The Production Technology For Food Will Result In A. An Increase In General Economic Growth B. A Decrease In The Production Of Education C. An Increase In Specific Economic Growth D. A Decrease In The Production Of Education E. A Decrease In The Opportunity Cost Of Education

33. Why Is There "No Such Thing As A Free Lunch"? A. You End Up Buying The Next Time B. You Often Get Stuck With The Check C. The Time You Spend Eating Lunch Could Be Spent Some Other Way D. "Free" Lunches Often Aren't Good And Make You Sick Later On E. You Don't Always Get What You Want To Eat

34. If A Country's Gdp Increases From $1,000 To $2,000 At The Same Time Prices Double, Real Gdp Will A. Rise B. Fall C. Stay The Same D. Fluctuate E. Be Unable To Be Determined

35. If A Country's Gdp Increases From $1m To $2m At The Same Time Prices Increase By Half (50%), Real Gdp Will A. Rise B. Fall C. Stay The Same D. Fluctuate E. Be Unable To Be Determined

36. If A Country's Gdp Increases From $1m To $2m At The Same Time Prices Remain The Same, Real Gdp Will A. Rise B. Fall C. Stay The Same D. Fluctuate E. Be Unable To Be Determined

37. Gross Domestic Product (Gdp) Is Defined As A. The Total Volume Of Goods And Services Produced In The Economy In A Year's Time B. The Value Of All Goods Produced In The Economy In A Year's Time, Minus Production Of Capital Goods C. The Value Of All Goods And Services Produced In Final Form In The Economy In A Year's Time Using Domestically Owned Resources D. The Value Of All Goods And Services That Could Possibly Be Produced In The Economy In A Year's Time E. None Of The Above

38. If Population In A Country Falls While Gdp Stays The Same, The Country's A. Real Gdp Falls B. Real Gdp Rises C. Per Capita Gdp Rises D. Per Capita Gdp Falls E. Welfare Falls

39. Which Of The Following Provides The Best Measure Of The Standard Of Living In An Economy In A Single Year? A. The Consumer Price Index B. The Wholesale Price Index C. Gross Domestic Product (Gdp) D. Per Capita Real Gdp E. None Of The Above

40. While Per Capita Gdp Is A Useful Measure Of Economic Well-Being, It Fails To Take Into Account A. The Population Of The Economy B. The Value Of Capital Goods Produced Within The Economy C. The Value Of Goods Produced For Export D. The Distribution Of Gdp Within The Economy E. Whether Goods Were Produced Within The Country

41. Which Of The Following Would Not Be Counted As Part Of U.S. Gdp? A. A Mazda Mx6 Produced In Detroit B. An Apple Computer Produced In California C. A Dodge Intrepid Produced In Canada D. A Six-Pack Of Sam Adams Brewed In Pittsburgh E. A Haircut Given In Washington D.C.

42. If Ford Motors Shifts All Production Outside Of The U.S., Which Of The Following Is ? A. Gnp Would Remain Unchanged And Gdp Would Decline B. Gdp Would Remain Unchanged C. Both Gnp And Gdp Would Remain Unchanged D. Gdp Would Remain Unchanged And Gnp Would Decline E. Gnp Would Increase

43. Suppose That Gross Domestic Product For 2012 Is $600 Million And The Price Index For That Year (2005 = 100) Is 300. Gdp For 2012 In Constant (2005) Dollars Is A. Impossible To Determine With This Information B. $200,000,000 C. $20,000 D. $200,000 E. $2,000,000

44. In 2011, A Country Produces 2 Bushels Of Wheat, Each Selling For $5. In 2012, The Country Also Produces 2 Bushels Of Wheat, But Each Bushel Sells For $10. Which Of The Following Is ? A. Real Gdp Did Not Change Between 2011 And 2012 B. Real Gdp Doubled Between 2011 And 2012 C. Gdp Did Not Change Between 2011 And 2012 D. Gdp Increased By 50% Between 2011 And 2012 E. None Of The Above Is

45. Given The Amounts Of Resources Available For An Economy, Gdp A. Will Be Determined Solely By The Amounts Of Labor And Capital Present B. Will Be Larger The Better The Techniques Of Production Used C. Can Increase Only If There Is An Increase In The Quantities Of These Resources D. Will Usually Be Equitably Divided Among The Population E. Will Not Change Over Time

46. In Year 1, An Economy Produces 10m Cars At A Price Of $15,000 Each. In Year 2, The Economy Produces 10m Cars, But The Price Of Each Car Is $20,000. Which Of The Following Is ? A. Real Gdp Has Increased B. Real Gdp Has Decreased C. Current Dollar Gdp Has Increased D. Current Dollar Gdp Has Decreased E. Productivity Has Increased

47. To Correct For Inflation, Gdp Numbers Must Be Converted Using The Price Level In A Given Year Known As The A. Base Year B. Real Year C. Current Year D. Constant Year E. Inflation Year

48. When Analyzing The Performance Of A Single Economy Over Time, Which Measure Is Most Appropriate? A. Real Gdp B. Gdp C. Real Gdp Per Capita D. Gdp Per Capita E. Base Year Gdp

49. When Comparing The Performance Of Economies In Terms Of The Average Well-Being Of Their Inhabitants, Which Measure Is Most Appropriate? A. Real Gdp B. Gdp C. Real Gdp Per Capita D. Gdp Per Capita E. Base Year Gdp

50. Real Per Capita Gdp Is Defined As A. Population/Real Gdp B. Gdp/Population C. Real Gdp/Price Index D. Real Gdp/Population

E. Price Index/Gdp

51. The Well-Being Of Ldcs, As Measured By Per Capita Real Gdp, Is Probably Overstated Due To A. Inflation B. Population Increases C. Unemployment D. Income Distribution E. Life Expectancy

52. In A Lesser-Developed Country, A High Rate Of Population Growth A. Stimulates Demand For Products And Accelerates The Development Process B. Seldom Occurs C. Is Not A Serious Problem, Since The Rate Of Growth In Gdp Always Exceeds The Rate Of Population Increase D. May Be A Problem Since, As Development Begins, The Higher Rate Of Population Growth Impedes The Growth Of Per Capita Income E. Is Beneficial For Economic Development

53. The Efficiency Of Resource Usage In Ldcs Can Be Improved By All Of The Following Except: A. The Adaptation Of New Technology

B. Increased Capital Investment C. Adopting More Flexible Wage Structures D. Maintaining The Existing Land Ownership, Or Tenure, System E. Upgrading Transportation Networks

54. Increases In A Country's Population Will Always Have Which Of The Following Effects? A. The Ppc Will Shift Out B. Welfare Will Decline C. Economic Development Will Be Slowed D. Death Rates Will Increase E. None Of The Above

55. The Most Important Key To Improvement In The Quality Of A Country's Labor Force Is A. Health Care B. Nutrition C. Mobility D. Education E. Population Growth

56. Developing Countries Can Shift Their Production Possibility Curves Out Through A. Improvements Of Labor Force Quality B. Capital Accumulation C. Technological Development D. Discovery Of New Natural Resources E. All Of The Above

57. Which Of The Following Are Potential Obstacles To Economic Development In Ldcs? A. Lack Of Resources B. Lack Of An Education C. War And Political Instability D. Traditional Methods Of Production And Ownership Of Resources E. All Of The Above

58. A Movement Along A Production Possibilities Curve Will Lead To An Increase In Social Well-Being, As Long As A. There Is Enough Labor And Capital Available To Make The Move B. The Msb Of The Move Is Greater Than The Msc C. The Msb Of The Move Is Equal To The Msc D. The Msb Of The Move Is Less Than The Msc E. No One In The Economy Is Left Worse Off By The Move

59. Marginal Social Cost Refers To The A. Cost Incurred Due To An Action Undertaken By Society B. Total Expenditures By Society On A Good Like A Public Park C. Cost Borne By Society When 1 More Unit Of A Good Is Produced D. Cost To Society Of Sub-Standard Production E. Cost To Society When An Additional Unit Of A Social Good Is Produced

60. The Opportunity Cost Borne By Society When An Additional Unit Of A Good Is Produced Is A. Marginal Social Cost B. Marginal Social Benefit C. Cost/Benefit Analysis D. Scarcity Rent E. Gdp

61. If 10 Units Of Food Must Be Given Up To Produce An Additional Unit Of Education, Which Of The Following Is ? A. The Msc Of The Unit Of Education Is 10 B. The Msb Of The Unit Of Education Is 10 C. The Msc Of The Food Is 10 D. The Msb Of The Food Is 10 E. None Of The Above

62. What Is The Msb Of A Shift From The Production Of 20 Units Of Food And 2 Units Of Education To 10 Units Of Food And 3 Units Of Education? A. 20 Units Of Food B. 10 Units Of Food C. 1 Unit Of Education D. 2 Units Of Education E. 3 Units Of Education

63. Which Of The Following Is A Technique Used To Determine The Optimal Level Of An Economic Activity? A. Cost/Benefit Analysis B. Production Possibilities Curve Analysis C. Gdp Analysis D. Opportunity Cost Analysis E. None Of The Above

64. Any Change For Which Msb>Msc Will A. Increase Social Well-Being B. Decrease Social Well-Being C. Not Change Social Well-Being D. Cost More Than It Is Worth To Society E. Increase Gdp

65. If The Msc Of An Additional Hour Of An Activity Is Greater Than The Msb, You Should A. Do More Of The Activity B. Do Less Of The Activity C. Not Change Your Level Of The Activity D. Do Less Of Another Activity E. Do More Of The Activity If You Like Doing It

66. Cost-Benefit Analysis A. Is Only Useful When Making Economic Choices B. Applies Best To Financial Decisions C. Suggests That An Activity Should Be Expanded If It Yields Greater Marginal Benefits Than Costs D. Is Useful In Correcting Gdp Numbers For Inflation E. Suggests An Activity Should Be Expended If Msc > Msb

67. Which Of The Following Is Not A Cause Of Poverty In Ldcs? The A. Quality Of Labor B. Stock Of Capital C. Level Of Technology D. Population Density E. Capital Accumulation Rates

68. The Quality Of The Labor Force Is Often Measured By A. Illiteracy Rates B. Gdp Per Capita C. Capital-To-Labor Ratios D. Life Expectancy E. Infant Mortality Rates

69. Which Of The Following Is Related To Poverty In Ldcs? A. Low Capital-To-Labor Ratios B. Few Available Capital Resources C. Poor Transportation Networks D. Limited Mineral Deposits E. All Of The Above

70. Which Of The Following Is An Example Of Social Infrastructure? A. The Transportation Network B. The Communication Network C. A Power System D. An Airport E. All Of The Above

71. With Private Property Rights, The Decision About How To Use Resources Are Made By A. The Government B. Private Firms C. Individual Resource Owners D. Resource Committees E. All Of The Above

72. To Promote Development, The Governments Of Ldcs Should Pursue Policies That A. Improve The Quality Of Labor B. Enhance Capital Accumulation C. Raise Technology Levels D. Increase Efficiency E. Do All Of The Above

73. Which Of The Following Policies Will Not Contribute To Economic Development In An Ldc? A. Pursue Economic Stability B. Promote Capital Accumulation Through Tax Incentives C. Provide Social Infrastructure D. Promote Efficiency E. Pursue Policies Designed To Increase Birth Rates

74. To Help Ldcs Develop, Governments Of Dcs Provide A. Loans B. Grants C. Humanitarian Aid D. Technical Assistance E. All Of The Above

75. Which Of The Following Is An Organization Through Which Dcs Jointly Assist Ldcs? A. The World Bank B. Nato C. The Federal Reserve D. Nafta E. The Wto

76. A Country Can Shift Out Its Production Possibilities Curve By A. Improving Its Technology B. Shifting Its Production From One Good To Another C. Experiencing A Population Drop D. Using Its Farmland More Productively E. All Of The Above

77. The Purpose Of A Base Year When Constructing A Price Index Is: A. Showing How The Output Values Rise From Year To Year B. Encourage Inflation C. Providing A Means To Compare The Economy's Output Across Different Time Periods D. To Show Why Expenditures On Government Goods And Services Need To Increase E. Indicate The Progress In Keeping Prices Low

True / False Questions

78. Approximately Two Thirds Of The World's Population Goes To Sleep Hungry At Night.

79. Approximately One Fifth Of The World Survives On Less Than $1 Per Day.

80. Nowhere In The World Today Experiences Famine.

81. The Developed Countries Are Approaching The Point At Which The Wants Of Their Population Are Fully Satisfied.

82. The Fundamental Economic Problem Is How To Make Money.

83. Economic Problems Arise Because Human Wants Are Unlimited And The Means Available For Satisfying Them Are Limited.

84. If Everyone Could Have Everything He Or She Wanted, There Would Be No Need For Economics.

85. The Quantity Of Goods And Services Per Year That An Economic System Can Produce Is Limited.

86. If Expanding An Activity Leads To Greater Msb Than Msc, Social Well-Being Is Increased By The Expansion.

87. Cost/Benefit Analysis Compares The Msc And Msb Of An Activity To Determine If The Level Of An Activity Should Be Changed.

88. Gdp Measures The Market Value Of All Final Goods And Services Produced Within An Economy During A Time Period, Regardless Of Who Owns The Resources Used In Production.

89. Gnp Would Include The Value Of Value Of Honda Accords Built In Ohio.

90. Per Capita Gdp Is A Near-Perfect Measure Of An Economy's Standard Of Living Because It Takes Into Account The Distribution Of The Economy's Income Among The Population.

91. If Data For A Series Of Years Shows Increases In Current Dollar Gdp, We Can Assume The Economy's Output Is Increasing.

92. Price Index Numbers Are Used To Correct Data Series For Inflation.

93. Current Dollar Gdp Can Increase While Real Gdp Decreases.

94. If Current Dollar Gdp Remains The Same While The Population Declines, Per Capita Gdp Will Decrease.

95. When Comparing Welfare In Two Different Countries, Per Capita Gdp Is A Better Measure Than Current Dollar Gdp.

96. Given That Two Countries, Alpha And Beta, Have The Same Per Capita Gdp, We Can Be Sure That The People Of The Two Countries Are Equally Well-Off.

97. The Expression, "There Ain't No Such Thing As A Free Lunch," Only Applies To Goods, Such As Cars, Not To Services, Such As Health Care And Education.

98. Inefficiency Exists Whenever The Economy's Output Combination Lies Inside Its Production Possibilities Curve.

99. Countries Will Always Produce Outside Their Production Possibilities Curves.

100. Education Is An Example Of A Good That Is "Free," Since An Improvement In Education Leads To An Outward Shift In The Production Possibilities Curve.

101. Unemployment Will Move An Economy To A Point Below Its Production Possibilities Curve.

102. A Production Possibilities Curve Shows The Possible Trade-Off Of One Good For Another In Production Under Conditions Of Full Employment.

103. An Increase In The Labor Force Will Bring About An Outward Shift In An Economy's Production Possibilities Curve.

104. An Improvement In Education Leads To An Outward Shift In The Production Possibilities Curve.

105. If A Movement Along The Production Possibilities Curve Yields Greater Benefits To Society Than Costs, The Movement Will Increase Social Well-Being.

106. The Marginal Social Cost Of A Movement Along A Production Possibilities Curve Is The Same As The Opportunity Cost Of The Move.

107. The Fact That Resources Are Rarely Perfectly Substitutable Gives The Production Possibilities Curve Its Bow Shape.

108. Without Increasing Opportunity Costs, A Production Possibilities Curve Will Be A Straight Line.

109. The Term Capital As Used By An Economist Refers To The Money Or The Stocks And Bonds That Are Used To Finance A Business Enterprise.

110. Technology Refers To The Known Means And Methods Available For Combining Resources To Produce Goods And Services.

111. Labor Resources Consist Of All Efforts Of Mind And Muscle That Are Available For Use In Production Processes.

112. Mineral Deposits Found In The Ground Are Not Considered Resources.

113. Population Growth Appears To Be The Major Problem Of Less Developed Countries.

114. The Available Data On Various Countries Of The World Show That There Is An Inverse Relationship Between Population Densities And Per Capita Gdp.

115. The Major Function Of The Federal Reserve Bank Is To Provide Low Interest Loans To Ldcs.

116. In Developing Countries, Reductions In The Death Rate Usually Lag Behind Reductions In The Birth Rate.

117. For Economic Development To Occur In Less-Developed Countries, It Is Important That Their Governments Establish An Economic Climate In Which Education Is Stressed And Capital Accumulation Is Encouraged.

118. A Broad-Based Education Is Generally Ineffective In Improving The Quality Of A Country's Labor Force.

119. Technological Development Goes Hand In Hand With Advancing Educational Levels And Capital Accumulation.

120. Roads And Bridges Are Examples Of Social Infrastructure.

121. When A Private Firm Builds A New Plant In An Ldc, The Country's Social Infrastructure Is Increased.

122. Income Inequality Is A Problem Faced By The Developed Countries, As Well As The Developing Countries, Of The World.

123. A Significant Problem Faced By Developing Countries Is The Tendency For Their Relatively Well-Educated Citizens To Leave Their Homes To Work And Live In The Developed World Where Compensation For Their Skills Is High.

124. Capital Flight From Less Developed To Developed Countries Tends To Offset Capital Infusions From Developed Countries.

125. The Governments Of Developed Countries Will Not Help Ldcs Develop By Providing Them With Capital And Technical Assistance Because Ldcs Must Learn To Develop On Their Own.

126. The "Brain Drain" Refers To The Deterioration Of Educational Attainment In Less Developed Countries Due To Poor Nutrition And Sanitation.

127. Poverty Is Primarily A Result Of Rapid Population Growth In Much Of The Underdeveloped World.

#ECO 405 Week 2 Quiz – Strayer NEW

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