Exam 11: The Macroeconomic Environment for Investment

When the Federal Reserve seeks to contract the money Supply, it may

The price of gold tends to rise during inflationary periods.

Recession is a period of

A recession is a period of rising employment.

Monetary and fiscal policy may affect stock prices through their impact on corporate earnings.

A federal government deficit may be financed by 1) the general public buying government bonds 2) commercial banks buying treasury bills 3) the Federal Reserve selling securities

An easy monetary policy should generate a lower required return for common stock.

The money supply, defined as M1, includes currency, coins, and checking accounts.

One means to invest in anticipation of deflation Is to

The sum of cash, currency, and demand deposits is

The federal funds rate is the rate federal government pays when it borrows funds.

If the Federal Reserve lowers the target federal Funds rate,

Changes in the price of gold are often related to the anticipation of inflation.

When the Federal Reserve seeks to expand the money Supply, it

If the country's exports increase, GDP declines.

Gross domestic product (GDP) is the sum of spending on consumer goods, government spending, and investing in stocks and bonds.

Economies go through regular, identifiable cycles that can be forecasted with accuracy.

An increase in the targeted federal funds rate implies that the Fed is buying securities.

Inflation is a period of

The economic goals of the Federal Reserve include 1) prosperity 2) full employment 3) stable prices