Deck 20: Global Economic Activity and Industry Analysis

Question 1

If the number of Euros required to buy $1 (USD)decreases then the Euro has ________ versus the U.S. dollar.

A)depreciated
B)appreciated
C)diminished
D)improved
E)increased

Answer 1

B

Question 2

Which of the following reflects the value of economic output adjusted to remove the effects of inflation?

A)current year GDP
B)real GDP
C)nominal GDP
D)adjusted GDP
E)actual GDP

Answer 2

B

Question 3

The relationship between inflation and real GDP is ________.

A)direct
B)positive
C)negative
D)non-existent
E)inverse

Answer 3

E

Question 4

Which of the following is NOT listed as a cause of increased integration of economies around the world?

A)increased technology
B)increased international travel
C)improved supply chain logistics
D)reduced trade barriers
E)all of these are listed

Question 5

Which one of the following is defined as the market value of goods and services produced over a period of time?

A)Domestic Market Product (DMP)
B)Gross Domestic Product (GDP)
C)Gross Economic Activity (GEA)
D)Gross Market Value (GMV)
E)Market Value Product (MVP)

Question 6

Which of the following is NOT considered a lagging economic indicator?

A)prime rate
B)change in CPI for services
C)industrial production
D)commercial and industrial loans
E)duration of unemployment

Question 7

Economic metrics that tend to rise and fall in advance of the economy are called ________ indicators.

A)predictive
B)forecast
C)leading
D)coincident
E)cyclical

Question 8

If the number of Euros required to buy $1 (USD)increases then the Euro has ________ versus the U.S. dollar.

A)depreciated
B)appreciated
C)diminished
D)improved
E)increased

Question 9

Which index measures the average prices paid by urban consumers for a basket of consumer goods and services?

A)Urban Inflation Index (UII)
B)Price Inflation Index (PII)
C)Urban Consumer Index (UCI)
D)Consumer Inflation Index (CII)
E)Consumer Price Index (CPI)

Question 10

A common rule of thumb on Wall Street says that the sum of the inflation rate plus the market price-earnings ratio equals ________.

A)10
B)15
C)20
D)25
E)30

Question 11

It has been estimated that "substitution effects" underestimate the Consumer Price Index by approximately how much?

A)3%
B)2.5%
C)1.75%
D)1.0%
E).5%

Question 12

The relationship between GDP and market capitalization for the leading economies of the world is generally ________.

A)weakly related
B)inversely related
C)negatively correlated
D)positively correlated
E)unrelated

Question 13

In the U.S., what percentage of the GDP is consumer spending?

A)40%
B)50%
C)60%
D)70%
E)80%

Question 14

Which of the following is NOT considered a leading economic indicator?

A)stock prices
B)M2 money supply
C)industrial production
D)interest rate spread
E)consumer expectations index

Question 15

Which of the following is NOT one of the four stages of the business cycle?

A)boom
B)peak
C)contraction
D)trough
E)expansion

Question 16

Which of the following reflects the dollar value of economic output in terms of the current year?

A)current year GDP
B)real GDP
C)nominal GDP
D)adjusted GDP
E)actual GDP

Question 17

Which of the following combinations describes a "goldilocks" scenario?

A)slow income growth, low unemployment, and low inflation
B)rapid income growth, high unemployment, and low inflation
C)rapid income growth, low unemployment, and low inflation
D)rapid income growth, low unemployment, and high inflation
E)rapid income growth, high unemployment, and high inflation

Question 18

All nonmilitary people employed and unemployed, but seeking employment make up the ________.

A)labor force
B)labor population
C)employable population
D)work force participants
E)employable work force

Question 19

The U.S. makes up approximately what percent of the global equity market capitalization?

A)20%
B)25%
C)30%
D)35%
E)40%

Question 20

The labor force divided by the nonmilitary working age population equals the ________.

A)work force participation rate
B)employable participation rate
C)labor population participation rate
D)labor force participation rate
E)participating employees rate

Question 21

The process of moving investments between sectors of the economy over time is called ________.

A)sector stagnation
B)sector selection
C)rotational investing
D)sector exchange
E)sector swapping

Question 22

Which of the following interest rates is directly controlled by the Federal Reserve?

A)the fed funds rate
B)the discount rate
C)the prime rate
D)mortgage rates
E)credit card rates

Question 23

Government determination of tax rates and spending policies is called ________.

A)tax policy
B)budgetary policy
C)federal spending policy
D)fiscal policy
E)monetary policy

Question 24

A breakdown of the S&P 500 into major sectors specifying the relative market weight of components and indicating the direction of movement of the prices of the underlying stocks is called a ________.

A)heat map
B)sector chart
C)component map
D)market capitalization chart
E)sector component map

Question 25

Which of the following describes the "M2" money supply?

A)M1 plus time deposits, savings accounts, and money markets
B)M1 plus time deposits and savings accounts
C)M1 plus time deposits and money markets
D)M1 plus money markets
E)M1 plus checking and time deposits

Question 26

The buying and selling of bonds by the Federal Reserve to manage the money supply is called ________.

A)quantitative easing
B)discount window operations
C)open market operations
D)money supply management
E)Federal Reserve operations

Question 27

"PIGS" refers to which 4 countries in Europe?

A)Portugal, Ireland, Greece, and Spain
B)Portugal, Ireland, Germany, and Switzerland
C)Poland, Ireland, Germany, and Sweden
D)Poland, Italy, Greece, and Spain
E)Poland, Italy, Greece, and Slovenia

Question 28

The power of a "rippling effect" of adding money to the financial system is measured by the ________.

A)ripple ratio
B)money multiplier
C)multiplier ratio
D)money magnifier
E)magnifier ratio

Question 29

The so-called "M1" money supply includes which of the following?

A)currency and checking deposits
B)currency and money markets
C)currency and time deposits
D)currency, time deposits and, money markets
E)checking and time deposits

Question 30

If government expenditures exceed tax revenue the resulting shortfall is termed a ________.

A)budget shortfall
B)taxing deficiency
C)budget deficit
D)revenue shortfall
E)revenue deficiency

Question 31

The short-term rate at which banks lend to each other is called the ________.

A)fed funds rate
B)Federal Reserve rate
C)discount rate
D)federal loan rate
E)reserve loan rate

Question 32

Which of the following is NOT a primary goal of the Federal Reserve?

A)keep inflation in check
B)encourage consumer spending
C)generate full employment
D)moderate the business cycle
E)help achieve long-term economic growth

Question 33

Which one of the following is NOT one of the elements in the industry life cycle?

A)start-up
B)rapid decline
C)consolidation
D)maturity
E)relative decline

Question 34

You invest $50,000 in Germany when the exchange rate is $1.35/€. Your investment gains 13%, and you subsequently exchange the euros back into dollars at a rate of $1.40/€. What is your total percentage return on this investment?

A)16.48%
B)16.89%
C)17.19%
D)17.35%
E)17.85%

Question 35

The interest rate the Federal Reserve charges its member banks on loans is called the:

A)fed funds rate.
B)Federal Reserve rate.
C)discount rate.
D)federal loan rate.
E)reserve loan rate.

Question 36

Which of the following is NOT one of Porter's five forces?

A)threat of new entrants
B)bargaining power of buyers
C)bargaining power of suppliers
D)threat of new technology
E)threat of substitute products

Question 37

Which of the following is NOT a threat of new entrants according to Porter's five forces?

A)economies of scale
B)product differentiation
C)quality of substitutes
D)capital requirements
E)government policies

Question 38

Which type of economic sectors has a high sensitivity to the business cycle?

A)defensive
B)offensive
C)lagging
D)cyclical
E)leading

Question 39

Which of the following is NOT a sector of the S&P?

A)consumer discretionary
B)energy
C)government
D)technology
E)financials

Question 40

Which type of economic sectors has a low sensitivity to the business cycle?

A)defensive
B)offensive
C)lagging
D)cyclical
E)leading

Question 41

Assume the inflation rate in 2020 is 2.1%. If the nominal GDP grew 4.6% and nominal wages grew 2.4%, what are the approximate real growth rates of GDP and wages?

A)2.0%; .8%
B)2.0%; .9%
C)2.2%; .3%
D)2.5%; .3%
E)2.5%; .6%

Question 42

An analyst gathered the following year-end price level data for an economy. What is the economy's annual compounded inflation rate for 2014-2019?
$$\begin{array} { l l } 2014 & 174.0 \\2018 & 190.3 \\2019 & 196.8\end{array}$$

A)2.22%
B)2.49%
C)2.68%
D)2.87%
E)2.92%

Question 43

If the nominal GDP was reported at $196.3 billion and real GDP was reported at $193.4 billion, what was the inflation rate for the period?

A)1.50%
B)1.83%
C)1.93%
D)2.22%
E)2.38%

Question 44

Your $785,000 investment in Mexico gained 6%. If the exchange rate moves from 13.4 pesos per dollar to 12.5 per dollar over the period, what is your total return on this investment?

A)12.57%
B)12.86%
C)13.12%
D)13.63%
E)13.91%

Question 45

You invest $250,000 in Japan at a starting exchange rate of 101.50¥/$. Your Japanese investment gains 5.6%, and the ending exchange rate is 102.40¥/$. What is your total return on this investment?

A)3.91%
B)4.13%
C)4.67%
D)4.82%
E)5.08%

Question 46

Suppose you are a U.S. investor who is planning to invest $200,000 in China. Your Chinese investment gains 7.5%. If the exchange rate moves from 5.10 Yuan per dollar to 5.20 Yuan per dollar over the period, what is your total return on this investment?

A)4.55%
B)4.71%
C)4.98%
D)5.29%
E)5.43%

Question 47

Assume the inflation rate in 2019 is 1.2%. If the nominal GDP grew 3.3% and nominal wages grew 2.1%, what are the approximate real growth rates of GDP and wages?

A)2.0%; .4%
B)2.0%; .5%
C)2.1%; .5%
D)2.1%; .9%
E)2.1%; .6%

Question 48

You are planning to invest $150,000 in Hong Kong. If your Hong Kong investment gains 5.0% while the exchange rate moves from 7.77 Hong Kong dollars (HK$)per U.S. dollar to 7.80 per dollar over the period, what is your total return on this investment?

A)4.2%
B)4.6%
C)4.9%
D)5.1%
E)5.3%

Question 49

If the nominal GDP was reported at $1,305.80 billion and inflation was 2.5%, what is the level of real GDP for the period?

A)$1,179.54
B)$1,191.41
C)$1,212.75
D)$1,255.01
E)$1,273.95

Question 50

Consider the following information on GDP and CPI for an economy over the last 3 years. Calculate nominal GDP growth for 2019.
$\begin{array}{lll}&\text { GDE}&\text { CPI }\\2017 & 128.6 &104.1 \\2018 & 132.4 & 104.9 \\2019 & 136.8&105.8\end{array}$

A)2.15%
B)2.56%
C)2.95%
D)3.15%
E)3.32%

Question 51

If wages grew 3.15% in 2019, but inflation was 2.75%, what was the approximate real increase in wages?

A).10%
B).20%
C).30%
D).40%
E).50%

Question 52

As a U.S. investor, you decide to invest $75,000 in Switzerland. You do so at a starting exchange rate of .97 CHF/$. Your Swiss investment gains 9%, and the ending exchange rate is .95 CHF/$. What is your total return on this investment?

A)11.29%
B)11.38%
C)11.47%
D)11.53%
E)11.66%

Question 53

Assume the CPI increases from 251.233 to 256.974 over the period. What is the inflation rate implied by this CPI change?

A)2.06%
B)2.19%
C)2.29%
D)2.43%
E)2.51%

Question 54

Assume there are 329 million people in the United States, 153 million of which make up the labor force. If 9 million are unemployed, what is the unemployment rate?

A)2.74%
B)5.56%
C)5.88%
D)6.29%
E)6.38%

Question 55

Consider the following information on GDP and CPI for an economy over the last 3 years. Calculate nominal GDP growth for 2018.
$\begin{array}{lll}&\text { GDE}&\text { CPI }\\2017 & 137.4 & 246.5 \\2018 & 139.4 & 251.2 \\2019 & 141.8 & 257.0\end{array}$

A)1.15%
B)1.46%
C)1.95%
D)2.15%
E)2.56%

Question 56

An analyst gathered the following year-end price level data for an economy. What is the economy's annual inflation rate for 2019?
$$\begin{array} { l l } 2017 & 190.3 \\2018 & 201.2 \\2019 & 207.1\end{array}$$

A)2.22%
B)2.42%
C)2.68%
D)2.87%
E)2.93%

Question 57

You invest $150,000 in Germany when the exchange rate is $1.25/€. Your investment gains 10%, and you subsequently exchange the euros back into dollars at a rate of $1.20/€. What is your total percentage return on this investment?

A)4.48%
B)4.89%
C)5.10%
D)5.35%
E)5.60%

Question 58

The CPI for this year was reported as 164.9. If inflation was 1.25%, what must the CPI have been last year?

A)161.21
B)161.63
C)162.47
D)162.65
E)162.86

Question 59

An analyst gathered the following year-end price level data for an economy. What is the economy's annual inflation rate for 2019?
$\begin{array}{lrr} \text { 2017 } &159.0\\ \text {2018 } &165.0\\\text {2019 } &169.0\end{array}$

A)2.27%
B)2.42%
C)2.49%
D)2.78%
E)3.77%

Question 60

Suppose you want to convert U.S. dollars to Indian rupees. If you have $120,000 and the exchange rate is $.0159 per rupee, how many rupees (in millions)will you receive in the conversion?

A)6.28 million
B)6.67 million
C)7.12 million
D)7.55 million
E)7.88 million

Question 61

Assume that the Federal Reserve injects $6 billion into the financial system. If the reserve requirement is 12%, what is the maximum increase in money supply (in billions)that may result?

A)$45.00
B)$49.39
C)$50.00
D)$51.30
E)$55.00

Question 62

Assume the inflation rate in 2016 is 1.5%. If the nominal GDP grew 3.1% and nominal wages grew 2.0%, what are the approximate real growth rates of GDP and wages?

A)1.0%; .4%
B)1.1%; .5%
C)1.2%; .5%
D)1.4%; .9%
E)1.6%; .5%

Question 63

If the nominal GDP was reported at $211.3 billion and real GDP was reported at $207.7 billion, what was the inflation rate for the period?

A)1.64%
B)1.73%
C)1.93%
D)2.27%
E)2.46%

Question 64

If the Federal Reserve injects $150 billion into the financial system and the money supply increases by a maximum of $750 billion, what must the reserve requirement be?

A)15%
B)18%
C)20%
D)22%
E)25%

Question 65

Assume that the Federal Reserve injects $5.32 billion into the financial system. If the reserve requirement is 9.5%, what is the maximum increase in money supply (in billions)that may result?

A)$50.00
B)$52.30
C)$54.88
D)$56.00
E)$57.39

Question 66

Your $1,000,000 investment in Mexican pesos gained 4.5%. If the exchange rate moves from 18.750 pesos per dollar to 19.593 pesos per dollar over the period, what is your total return on this investment?

A)−4.50%
B)−2.25%
C)0%
D)2.25%
E)4.50%

Question 67

If the nominal GDP was reported at $222.1 billion and real GDP was reported at $218.2 billion, what was the inflation rate for the period?

A)1.50%
B)1.72%
C)1.79%
D)2.02%
E)2.28%

Question 68

If the nominal GDP was reported at $1,677 billion and inflation was 1.25%, what is the level of real GDP for the period?

A)$1,579.54
B)$1,591.41
C)$1,612.75
D)$1,656.30
E)$1,673.95

Question 69

Assume that the Federal Reserve injects $3.2 billion into the financial system. If the reserve requirement is 13%, what is the maximum increase in money supply (in billions)?

A)$24.00
B)$24.30
C)$24.88
D)$24.10
E)$24.62

Question 70

If the nominal GDP was reported at $1,351.90 billion and inflation was 3.8%, what is the level of real GDP for the period (in billions)?

A)$1,289.54
B)$1,302.41
C)$1,344.92
D)$1,385.01
E)$1,402.45

Question 71

Assume there are 450 million people in the United States, 165 million of which make up the labor force. If 18 million are unemployed, what is the unemployment rate?

A)8.35%
B)9.58%
C)10.91%
D)11.05%
E)11.74%

Question 72

You invest $20,000 in France when the exchange rate is $1.22/€. Your investment gains 10%, and you subsequently exchange the euros back into dollars at a rate of $1.36/€. What is your total percentage return on this investment?

A)−22.62%
B)−1.32%
C)1.32%
D)22.62%
E)24.39%

Question 73

Assume that the Federal Reserve injects $3.93 billion into the financial system. If the reserve requirement is 11%, what is the maximum increase in money supply (in billions)that may result?

A)$33.00
B)$34.74
C)$35.39
D)$35.73
E)$36.60

Question 74

Assume that the Federal Reserve injects $45 billion into the financial system. If the money supply increases by a maximum of $300 billion, what must the reserve requirement be?

A)10%
B)12%
C)15%
D)18%
E)20%

Question 75

You invest $75,000 in Germany when the exchange rate is $1.25/€. Your investment gains 10%, and you subsequently exchange the euros back into dollars at a rate of $1.30/€. What is your total percentage return on this investment?

A)13.48%
B)13.89%
C)14.19%
D)14.40%
E)14.85%

Question 76

If the nominal GDP was reported at $1,239.29 billion and inflation was 2.1%, what is the level of real GDP for the period?

A)$1,079.54
B)$1,102.41
C)$1,213.80
D)$1,225.01
E)$1,233.95

Question 77

Suppose you are a U.S. investor who is planning to invest $100,000 in China. Your Chinese investment gains 5%. If the exchange rate moves from 7.12 Yuan per dollar to 7.14 Yuan per dollar over the period, what is your total return on this investment?

A)4.42%
B)4.56%
C)4.71%
D)5.26%
E)5.33%