Exam 11: The Macroeconomic Environment for Investment

Open market operations is the buying and selling of securities by the Federal Reserve.

The financial crises lead to

Deflation is a period of rising employment.

M?2 is a narrower definition of the money supply and excludes savings accounts in commercial banks.

Increased unemployment may be associated with

The Federal Reserve is the central bank of the United States.

Which of the following is not a leading indicator?

Deflation is a period of

If the Federal Reserve sells securities, that reduces commercial banks' capacity to lend.

An easy monetary policy increases the cost of credit.

An increase in the expected rate of inflation suggests that investors should sell the stocks of natural resource companies (e.g., gold and silver).

The federal funds rate is the rate banks charge each other when they borrow reserves.

The fiscal policy of the federal government excludes

An increase in stock prices is a lagging indicator of economic activity.

The anticipation of inflation suggests that the Investor should

Monetary policy affects securities prices by 1) affecting investors' required return 2) increasing the federal deficit 3) affecting firms' capacity to generate earnings