Question 1

For a given level of tax collections, prices, and interest rates, a decrease in government purchases will result in a(n)

: b. Decrease in aggregate demand.

a. Increase in aggregate demand.

b. Decrease in aggregate demand.

c. Decrease in aggregate supply.

d. Increase in aggregate supply.

Question 2

Which of the following statements is correct if there is an increase in the resources available within an economy?

: b. The economy will be capable of producing more goods and services.

a. The technological efficiency of the economy will improve.

b. The economy will be capable of producing more goods and services.

c. The standard of living in the economy will rise.

d. More goods and services will be produced in the economy.

Question 3

The trough of a business cycle is generally characterized by

: c. Unused productive capacity and an unwillingness to risk new investments.

a. Shortages of essential raw materials and rising costs.

b. Rising costs and an unwillingness to risk new investments.

c. Unused productive capacity and an unwillingness to risk new investments.

d. Increasing purchasing power and increasing capital investments.

Question 4

Which of the following may provide a leading indicator of a future increase in gross domestic product?

: a. An increase in the average hours worked per week of production workers.

a. An increase in the average hours worked per week of production workers.

b. An increase in the timeliness of delivery by vendors.

c. A reduction in the money supply.

d. A decrease in the issuance of building permits.

Question 5

Which of the following actions is the acknowledged preventive measure for a period of deflation?

: c. Increasing the money supply.

a. Decreasing the money supply.

b. Decreasing interest rates.

c. Increasing the money supply.

d. Increasing interest rates.

Question 6

The discount rate of the Federal Reserve System is

: b. The rate that the central bank charges for loans granted to commercial banks.

a. The rate that commercial banks charge for loans granted to the public.

b. The rate that the central bank charges for loans granted to commercial banks.

c. The ratio of excess reserves to legal reserves that are deposited in the central bank.

d. The specified percentage of a commercial bank’s deposit liabilities that must be deposited in the central bank.

Question 7

Platinum Co. has a receivable due in 30 days for 30,000 euros. The treasurer is concerned that the value of the euro relative to the dollar will drop before the payment is received. What should Platinum do to reduce the risk?

: b. Enter into a forward contract to sell 30,000 euros in 30 days.

a. Buy 30,000 euros now.

b. Enter into a forward contract to sell 30,000 euros in 30 days.

c. Platinum cannot effectively reduce this risk.

d. Enter into an interest rate swap contract for 30 days.

Question 8

A multinational company operates a production facility in country A and a distribution outlet in country B. The tax rates are 40% in country A and 50% in country B. The production facility sells the goods to the distribution outlet, both of which are wholly owned by the multinational company. The internal sale of goods occurs at a “transfer” price set by the multinational company.  Assuming no nontax considerations and no interference from the tax authorities of the two countries, the company should

: a. Maximize the transfer price.

a. Maximize the transfer price.

b. Minimize the transfer price.

c. Establish a transfer price that results in the same profit margin for both operations.

d. Use a transfer price based on the market price for the product that other producers charge.

Question 9

When analyzing a country’s balance of payments accounts, the

: c. 

"Capital account" refers to the transactions related to the international movement of financial capital.

a. 

"Current account" and "trade balances" are the same.

b. Country will be in financial jeopardy unless each component in the balance of payments accounts balances at the end of the year.

c. 

"Capital account" refers to the transactions related to the international movement of financial capital.

d. 

"Current account" refers only to merchandise exports and imports.

Question 10

Freely fluctuating exchange rates perform which of the following functions?

: b. They automatically correct a lack of equilibrium in the balance of payments.

a. They impose constraints on the domestic economy.

b. They automatically correct a lack of equilibrium in the balance of payments.

c. They make imports cheaper and exports more expensive.

d. They eliminate the need for foreign currency hedging.

Question 11

Which of the following is a direct effect of imposing a protective tariff on an imported product?

: c. Lower domestic consumption of the item.

a. Higher sales revenues for foreign producers of the item.

b. Lower domestic prices on the imported item.

c. Lower domestic consumption of the item.

d. Reduced domestic production of the item.

Question 12

Bigo, Inc., a U.S. entity, decided to build a production facility in Mexico. To finance construction, it borrows one million pesos from Banco Uno, a Mexican bank. Which of the parties is exposed to currency exchange risk? 

Bigo, Inc. Banco Uno

: a. 

Yes No

a. 

Yes No

b. 

Yes Yes

c. 

No No

d. 

No Yes

Question 13

In which of the following circumstances, as the dollar changes against the foreign currency, would an investment in a foreign currency result in fewer dollars and a borrowing in a foreign currency cost more dollars? 

Investment in Foreign Currency Borrowing in Foreign Currency

: c. 

Dollar strengthens Dollar weakens

a. 

Dollar weakens Dollar strengthens

b. 

Dollar strengthens Dollar strengthens

c. 

Dollar strengthens Dollar weakens

d. 

Dollar weakens Dollar weakens

Question 14

Which of the following is not a kind of economic crisis that could be addressed by the International Monetary Fund?

: d. Balance of trade crisis.

a. Currency crisis.

b. Banking crisis.

c. Debt crisis.

d. Balance of trade crisis.

Question 15

Which of the following most closely represents the U.S. share of worldwide GDP (output)?

: d. 25%.

a. 10%.

b. 50%.

c. 90%.

d. 25%.

Question 16

Which one of the following countries is not one of the world's largest exporters of goods and services?

: b. Mexico.

a. U.S.

b. Mexico.

c. Germany.

d. China.

Question 17

DQZ Telecom is considering a project for the coming year that will cost $50,000,000.  DQZ plans to use the following combination of debt and equity to finance the investment: 
 


Issue $15,000,000 of 20‐year bonds at a price of 101, with a coupon rate
 of 8%, and flotation costs of 1.5% of par. The after‐flotation cost yield is 8.08%.

Use $35,000,000 of funds generated from earnings.

The equity market is expected to earn 12%. U.S. Treasury bonds are
 currently yielding 5%. The beta coefficient for DQZ is estimated to be .60.
 DQZ is subject to an effective corporate income tax rate of 40%.


 
 The Capital Asset Pricing Model (CAPM) computes the expected return on a security by adding the risk‐free rate of return to the incremental yield of the expected market return, which is adjusted by the company’s beta. Compute DQZ’s expected rate of return on equity.

: b. 9.2%

a. 7.2%

b. 9.2%

c. 12%

d. 12.2%

Question 18

Assume that nominal interest rates just increased substantially but that the expected future dividends for a company over the long run were not affected.  As a result of the increase in nominal interest rates, the company’s stock price should

: c. Decrease.

a. Stay constant.

b. Increase.

c. Decrease.

d. Change, but in no obvious direction.

Question 19

Which of the following describes an option?

: a. A contract that allows the holder to purchase a specified quantity of a financial instrument at a specified price.

a. A contract that allows the holder to purchase a specified quantity of a financial instrument at a specified price.

b. An agreement to swap a stream of cash flows.

c. A standardized contract to take delivery of a specified quantity of a financial instrument in the future.

d. A negotiated contract to purchase a specified quantity of a financial instrument in the future.

Question 20

When an entity adopts a cost leadership strategy, which one of the following might it use to help carry out this strategy? 

Processing Efficiencies Outsourcing

a. 

No No

b. 

Yes Yes

c. 

Yes No

d. 

No Yes

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Status NEW Posted 03 Oct 2017 05:10 PM My Price 14.00

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