Deck 29: Tying It All Together

Question 1

Suppose a nation has a total population of 100,000,000. Out of that, 60% are in the labor force and 55,000,000 people are employed. What is the nation's unemployment rate?

A) 5.0%
B) 8.3%
C) 9.1%
D) 10.9%

Answer 1

B

Question 2

Suppose that during a given month 200,000 persons who had been self-employed leave their business and get jobs working for other businesses. This will cause

A) the unemployment rate to rise.
B) the unemployment rate to fall.
C) payroll employment to rise.
D) payroll employment to fall.
E) no change in either the unemployment rate or payroll employment.

Answer 2

C

Question 3

A person with two jobs is counted __________ in the household survey and __________ in the establishment survey.

A) once; once
B) once; twice
C) twice; once
D) twice; twice

Answer 3

B

Question 4

Suppose a nation has a total population of 50,000,000. Out of that, 50% are in the labor force and 23,000,000 people are employed. What is the nation's unemployment rate?

A) 4.0%
B) 8.0%
C) 12%
D) 14%

Question 5

Suppose that during a given month 200,000 persons who had been self-employed leave their business and get jobs working for other businesses. This might give __________ bias to the __________ indicator.

A) an optimistic; unemployment rate
B) a pessimistic; unemployment rate
C) an optimistic; payroll employment
D) a pessimistic; payroll employment

Question 6

Which of these indicators is probably the most politically sensitive?

A) Housing starts
B) Capacity utilization
C) Employment
D) Car sales

Question 7

A reduction in housing starts, typically due to __________ interest rates, is often thought to precede __________.

A) rising; an expansion
B) rising; a recession
C) falling; an expansion
D) falling; a recession

Question 8

The Purchasing Managers' Index is __________ indicator.

A) a leading
B) a coincident
C) a lagging
D) an inconsistent

Question 9

Which of the following is a lagging economic indicator?

A) Housing starts
B) Employment
C) Retail sales
D) Inflation

Question 10

A Purchasing Manager's Index above 50 indicates

A) an expanding manufacturing sector.
B) a downturn in economic activity.
C) an increase in bond prices in the near future.
D) an expanding retail sector.

Question 11

Suppose that during a given month 500,000 persons quit their job to become self-employed. This will cause

A) the unemployment rate to fall.
B) the unemployment rate to rise.
C) payroll employment to rise.
D) payroll employment to fall.
E) no change in either the unemployment rate or payroll employment.

Question 12

An increase in housing starts, typically due to __________ interest rates, is often thought to precede __________.

A) rising; an expansion
B) rising; a recession
C) falling; an expansion
D) falling; a recession

Question 13

A Purchasing Manager's Index below 50 indicates

A) a declining retail sector.
B) a downturn in economic activity.
C) an increase in bond prices in the near future.
D) a declining manufacturing sector.

Question 14

"Housing starts" is __________ indicator.

A) a leading
B) a coincident
C) a lagging
D) an inconsistent

Question 15

The BLS monthly household survey involves about __________ households in the United States.

A) 6,000
B) 60,000
C) 600,000
D) 6,000,000

Question 16

Suppose a nation has a total population of 100,000,000. Out of that, 70% are in the labor force and 65% of the population is employed. What is the nation's unemployment rate?

A) 5.0%
B) 7.1%
C) 7.7%
D) 30.0%

Question 17

A household survey is used to calculate

A) the unemployment rate.
B) the level of payroll employment.
C) both the unemployment rate and the level of payroll employment.
D) neither the unemployment rate nor the level of payroll employment.

Question 18

Suppose that during a given month 500,000 persons quit their job to become self-employed. This might give __________ bias to the __________ indicator.

A) an optimistic; unemployment rate
B) a pessimistic; unemployment rate
C) an optimistic; payroll employment
D) a pessimistic; payroll employment

Question 19

An establishment survey is used to calculate

A) the unemployment rate.
B) the level of payroll employment.
C) both the unemployment rate and the level of payroll employment.
D) neither the unemployment rate nor the level of payroll employment.

Question 20

The Bureau of Labor Statistics unveils an unemployment rate figure every

A) two weeks.
B) month.
C) two months.
D) quarter.

Question 21

A rise in Durable Goods Orders should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 22

An unexpected fall in Capacity Utilization should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 23

An unexpected rise in GDP growth should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 24

An unexpected fall in the Purchasing Managers' Index should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 25

An unexpected fall in New Home Sales should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 26

Which of the following is not in the index of leading economic indicators?

A) Average workweek
B) Initial unemployment claims
C) Building permits
D) Producer price index

Question 27

An unexpected rise in the LEI should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 28

Leading economic indicators are economic indicators that __________ changes in economic activity

A) change after
B) change at the same time as
C) change before
D) None of the above.

Question 29

An unexpected fall in Housing Starts should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 30

An unexpected fall in Retail Sales should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 31

An unexpected fall in car sales should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 32

An unexpected rise in Retail Sales should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 33

A drop in Durable Goods Orders should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 34

An unexpected fall in durable goods orders should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 35

An unexpected rise in the Purchasing Managers' Index should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 36

An unexpected rise in Housing Starts should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 37

It takes __________ consecutive monthly changes in the LEI before a change in economic activity is being foreshadowed.

A) two
B) three
C) four
D) six

Question 38

An unexpected fall in GDP growth should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 39

An unexpected rise in Capacity Utilization should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 40

An unexpected rise in New Home Sales should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 41

"Bad news" about an expenditure-related indicator drives bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 42

An unexpected drop in the growth rate of the CPI should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 43

"Good news" about an expenditure-related indicator drives bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 44

An unexpected rise in the growth rate of the CPI should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 45

In the stock valuation formula "good news" affects both the numerator and denominator. Conventional wisdom on Wall Street is that the effect on the __________ is __________ the effect on the __________.

A) numerator; less than; denominator
B) numerator; greater than; denominator
C) numerator; the same as; denominator
D) None of the above.

Question 46

Good news about an economic indicator __________ the denominator of a bond's valuation formula, __________ the bond's price.

A) raises; raising
B) raises; lowering
C) lowers; raising
D) lowers; lowering

Question 47

A ten-year $1,000,000-face-value zero-coupon Treasury bond has a market price of __________ when the interest rate is 9.62%.

A) $399,119
B) $674,844
C) $903,800
D) $962,000

Question 48

A ten-year $1,000,000-face-value zero-coupon Treasury bond has a market price of __________ when the interest rate is 6.34%.

A) $366,000
B) $936,600
C) $784,902
D) $540,796

Question 49

"Good news" about an expenditure-related indicator means that

A) it is higher than its previous value.
B) it is higher than it was expected to be.
C) it is lower than its previous value.
D) it rose faster than the rate of inflation.

Question 50

A share of stock expected to pay an annual dividend of $12 forever has a market price of __________ when the Treasury bond rate is 6.5% and the stock has a risk premium of 4.5%.

A) $109.09
B) $184.62
C) $266.67
D) $600

Question 51

News about __________ sends stock and bond prices in the same direction.

A) some expenditure indicators
B) GDP
C) inflation
D) capacity utilization

Question 52

For a ten-year $1,000,000-face-value zero-coupon Treasury bond, how does its market price change when the interest rate goes from 6.84% to 6.92%?

A) A fall of $1192
B) A fall of $3848
C) A fall of $8000
D) A rise of $8000

Question 53

An unexpected drop in the LEI should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 54

Good news about an economic indicator __________ the denominator and __________ the numerator in the stock price valuation formula.

A) raises; raises
B) raises; lowers
C) lowers; raises
D) lowers; lowers

Question 55

A share of stock expected to pay an annual dividend of $10 forever has a market price of __________ when the Treasury bond rate is 6% and the stock has a risk premium of 4%.

A) $100.00
B) $166.67
C) $250.00
D) $500.00

Question 56

"Bad news" about an expenditure-related indicator means that

A) it is lower than its previous value.
B) it is lower that it was expected to be.
C) it is higher than it was expected to be.
D) it rose more slowly than the rate of inflation.

Question 57

An unexpected fall in the Producer Price Index should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down

Question 58

An unexpected rise in the Producer Price Index should send bond prices __________ and stock prices __________.

A) up; up
B) up; down
C) down; up
D) down; down