Economics Questionnaire

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Douglas, Fall 2009 November 3, 2009 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED:__________________________

21 A : Special Code 0000___

PRINT NAME: __________________________________

Econ 202 Section 2 Midterm 2
1. The sale of stocks a. and bonds to raise money is equity finance. b. and bonds to raise money is debt finance. c. to raise money is equity finance, while the sale of bonds to raise funds is debt finance. d. to raise money is debt finance, while the sale of bonds to raise funds is equity finance. 2. If you believe that stock prices follow a random walk, then probably you a. do not believe that stock prices reflect all available information. b. believe that it is a good idea to engage in fundamental analysis. c. believe in the validity of the efficient markets hypothesis. d. do not believe that there is positive relationship between risk and return. 3. Grant Gant was a doctor in 1944 and earned $12,000 that year. His daughter, Gretta Gant, is a doctor today

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and she earned $210,000 in 2005. The price index was 20 in 1944 and 200 in 2005. Grant Gant’s 1944 income in 2005 dollars would be a. $120,000 b. $216,000 c. $1,200. d. $24,000. Suppose that in a closed economy GDP = $22,000, taxes = $5000, consumption = $14,000, and government purchases = $6,000. What are private saving and public saving? a. $1,500 and -$500, respectively b. $3000 and $1000, respectively c. $3000 and -$1000, respectively d. 2,000 and $1000, respectively Unemployment compensation is a. part of GDP because it represents income. b. not part of GDP because the payments reduce business profits. c. part of GDP because the recipients must have worked in the past to qualify. d. not part of GDP because it is a transfer payment. The old adage, “Don’t put all your eggs in one basket,” is very similar to a modern bit of advice concerning financial matters: a. “Diversify.” b. “Use a medium of exchange.” c. “Intermediate.” d. “Buy low-risk bonds.” Who is the current chairman of the Federal Reserve’s Board of Governors? a. Ben Bernanke b. Nicholas Biddle c. William Trumbull d. Alan Greenspan All else equal, when people become more optimistic about a company's future, the a. supply of the stock and the price will both rise. b. demand for the stock and the price will both fall. c. demand for the stock and the price will both rise. d. supply of the stock and the price will both fall. 1

Econ202Sec02 Exam 2, Fall 2009

Douglas, A

9. What would happen to the equilibrium price and quantity sold of ski poles if the price of new skis (a

complement) falls, at the same time that the cost of aluminum used in ski poles rises? a. Quantity will rise and price may either rise or fall. b. Price will rise and quantity may either rise or fall. c. Quantity will fall and price may either rise or fall. d. Price will fall and quantity may either rise or fall. Table 28-1 Labor Data for Wrexington Year Adult population Number of employed Number of unemployed 2004 2000 1400 200 2005 3000 1300 600 2006 3200 1600 200

10. Refer to Table 28-1. The labor force of Wrexington in 2004 was a. 1400. b. 1800. c. 2000. d. 1600. 11. Which of the following events could explain an increase in interest rates occurring at the same time as a

decrease in investment? a. The government instituted an investment tax credit. b. The government budget went from surplus to deficit. c. The government reduced the tax rate on savings. d. None of the above is correct. 12. Suppose you purchased $100,000 worth of stock in the Mania Housing Company using $50,000 of your own financial capital (money), and $50,000 of borrowed money. You sold the stock a year later for $80,000 and paid off your loan with 10% interest. You received a return on your own capital of a. -20%. Leverage makes no difference in how much you lose. b. -25%. Without leverage you would have taken only a 20% loss. c. -50%. Without leverage, you would have...
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