Chapter 17 - Macroeconomic and Industry AnalysisChapter17Macroeconomic and industry Analysis1.A top down analysis of a firm starts with _.D.the global economy2.An example of a highly cyclical industry is _.A.the automobile industry3.Demand-side economics is concerned with _.A.government spending and tax levelsB.monetary policyC.fiscal policyE.A, B, and C4.The most widely used monetary tool is _.C.open market operations5.The real, or inflation-adjusted, exchange rate, isC.the purchasing power ratio.6.The normal range of price-earnings ratios for the S&P 500 Index isD.between 12 and 257.Monetary policy is determined byC.the board of Governors of the Federal Reserve System.8.A trough is _.B.a transition from a contraction in the business cycle to the start of an expansion9.A peak is _.A.a transition from an expansion in the business cycle to the start of a contraction10.If the economy is growing, firms with high operating leverage will experience _.A.higher increases in profits than firms with low operating leverage.11.If the economy is shrinking, firms with high operating leverage will experience _.A.higher decreases in profits than firms with low operating leverage.12.If the economy is growing, firms with low operating leverage will experience _.C.smaller increases in profits than firms with high operating leverage.13.If the economy is shrinking, firms with low operating leverage will experience _.C.smaller decreases in profits than firms with high operating leverage.14.Industrial production refers to _.C.the total manufacturing output in the economy.15.GDP refers to _.D.the total production of goods and services in the economy16.A rapidly growing GDP indicates a(n) _ economy with _ opportunity for a firm to increase sales.D.expanding; ample17.A declining GDP indicates a(n) _ economy with _ opportunity for a firm to increase sales.A.stagnant; little18.The average duration of unemployment and changes in the consumer price index for services are _.C.lagging economic indicators19.A firm in an industry that is very sensitive to the business cycle will likely have a stock beta _.A.greater than 1.020.If the economy were going into a recession, an attractive industry to invest in would be the _ industry.B.medical services21.The stock price index and contracts and new orders for nondefense capital goods areA.leading economic indicators.22.A firm in the early stages of the industry life cycle will likely have _.B.high risk.C.rapid growthE.B and C23.Assume the U.S. government was to decide to increase the budget deficit. This action will most likely cause _ to increaseA.interest ratesB.government borrowingD.both A and B24.Assume the U.S. government was to decide to decrease the budget deficit. This action will most likely cause _ to decreaseA.interest ratesB.government borrowingD.both A and B25.Assume that the Federal Reserve decreases the money supply. This action will cause _ to decrease.C.investment in the economy26.If the currency of your country is depreciating, the result should be to _ exports and to _ imports.B.stimulate, discourage27.If the currency of your country is appreciating, the result should be to _ exports and to _ imports.C.discourage, stimulate28.Increases in the money supply will cause demand for investment and consumption goods to _ in the short run and cause prices to _ in the long run.A.increase, increase29.The North American Industry Classification System (NAICS)A.are for firms that operate in the NAFTA region.B.group firms by industry.D.A and B.30.If interest rates increase, business investment expenditures are likely to _ and consumer durable expenditures are likely to _.D.decrease, decrease31.Fiscal policy generally has a _ direct impact than monetary policy on the economy, and the formulation and implementation of fiscal policy is _ than that of monetary policy.B.more, slower32.Fiscal policy is difficult to implement quickly becauseA.it requires political negotiations.B.much of government spending is nondiscretionary and cannot be changed.D.A and B.33.InflationA.is the rate at which the general level of prices is increasing.B.rates are high when the economy is considered to be overheated.D.A and B.Two firms, A and B, both produce widgets. The price of widgets is $1 each. Firm A has total fixed costs of $500,000 and variable costs of 50 cents per widget. Firm B has total fixed costs of $240,000 and variable costs of 75 cents per widget. The corporate tax rate is 40%. If t