ECO 105 Week 7 Quiz

ECO 105 Week 7 Quiz | Assignment Help | Wilmington University 

Week 7 Quiz

 

Question 1

A bond is best defined as:

o   a revolving loan that allows the borrower to borrow as needed from a line of credit at a bank.

o   a share of ownership in a company.

o   a loan that commits the borrower to make regular interest payments over time, and then repay the principal.

o   a non-transferable loan backed by real estate.

 

 

Question 2

A share of stock is best defined as:

 

o   a non-transferable loan backed by real estate.

o   a transferable loan backed by the assets of the company.

o   a share of ownership in a company.

o   a loan that commits the borrower to make regular interest payments over time, and then repay the principal.

 

 

Question 3

Funds that banks lend to borrowers come from:

 

o   the Federal Reserve.

o   depositors.

o   the U.S. Treasury.

o   the bank's stockholders.

 

 

 

Question 4

If a country's currency is "pegged" to another currency, this means:

 

o   that the currency's value is determined by the supply and demand for that currency in a free currency market.

o   that the World Trade Organization sets the exchange rate, and enforces it with trade sanctions.

o   that workers in that country use the other nation's currency in daily transactions.

o   that the government of that country is managing the exchange rate so that it stays the same.

 

 

Question 5

If the United States were to produce all of its own steel, rather than importing large quantities of steel from other nations, the effect would be:

 

o   to make steel consumers, such as auto manufacturers, better off.

o   to lower steel prices, since steel would not have to be transported as far.

o   to draw resources necessary to make steel away from the rest of the economy, slowing the economy as a whole.

o   to improve the well-being of foreign steel producers, since they would not have to ship steel all the way to the United States.

 

 

Question 6

In 1981, Japanese auto manufacturers signed on to a "voluntary restraint agreement" which limited the number of cars they could export to the United States. The effect of this was to:

 

o   increase the price dealers obtained for Japanese cars in the United States.

o   lower the quantity of domestic cars available to American buyers.

o   drive down the price of Japanese cars compared to U.S.-made cars.

o   benefit Japanese auto manufacturers by reducing the number of cars they have to ship to the United States, allowing them to sell more in their domestic market.

 

 

Question 7

Protecting a country's "infant industries":

 

o   leads to long run growth in most cases, since the industries are given a chance to be competitive.

o   encourages short-run competition with the protected industry, so that the industry will be forced to become efficient more rapidly.

o   seems to hurt the economy in practice, because consumers of that industry's products are denied access to low-cost or higher-q uality imports.

o   will hurt the protected industry in the short run, but generate growth for that industry in the long run.

 

Question 8

Software companies have high fixed costs and low marginal costs. This means that if a software company sells its product in the global market:

 

o   it will gain a large benefit from its fixed investment and generate higher profits.

o   it will lose money, since the additional expense of selling in the global market will add a large amount to fixed costs and add very little to revenues.

o   the company will earn more money in the short run, but lose money in the long run, as entry into other markets encourages more competition.

o   the country in which the software company is located will suffer losses, since the price of the software will rise with the additional worldwide demand.

 

 

Question 9

Some small, new industries are not as efficient as their more mature foreign competitors. The argument for protecting these industries from foreign competition is known as:

 

o   the national security argument.

o   the infant industry argument.

o   the unfair competition argument.

o   the anti-dumping argument.

 

 

Question 10

Suppose Australia subsidizes its wine exports. Which one of the following groups will benefit from this policy?

 

o   American wine consumers

o   Australian wine consumers

o   American wine producers

o   Australian tax payers

 

Question 11

Suppose a growing company wishes to raise capital through the sale of stock. It will approach an investment bank and arrange for the sale of stock. Which credit channel is the company using?

 

o   The bond credit channel

o   The bank credit channel

o   The equity credit channel

o   The venture capital credit channel

 

 

Question 12

Suppose it takes workers in Baldistan 20 hours to produce a metal folding table, and it takes workers in Plochia 18 hours to produce an identical table. Workers in Baldistan take 40 hours to produce a set of ceramic plates, and it takes workers in Plochia 22 hours to make identical plates. Which of the following is true?

 

o   Plochia is better off making tables and plates alone and not trading with Baldistan, since Plochian workers are faster at producing both types of goods.

o   Baldistan and Plochia can gain from trading with one another.

o   Baldistan has a comparative advantage in making plates.

o   Plochia has a comparative advantage in making both tables and plates.

 

 

Question 13

Suppose workers in Freecia can produce two bushels of rice with the same amount of effort it takes them to produce one memory chip. Workers in Warmia can produce five bushels of rice with the same effort it takes them to produce two memory chips. Which of the following must be true?

 

o   Warmia has a comparative advantage in producing memory chips.

o   Warmia has an absolute advantage in producing memory chips.

o   Freecia has a comparative advantage in producing memory chips.

o   Freecia has an absolute advantage in producing memory chips.

 

 

Question 14

Suppose you come up with a wonderful new invention, and after borrowing as much as you can from a bank, you believe that additional capital is needed to make the invention marketable. Your small new company would be most likely to find additional capital from the:

 

o   bond credit channel.

o   equity credit channel.

o   stock credit channel.

o   venture capital credit channel.

 

 

Question 15

The danger that the overall price level will rise faster than anticipated, so that the lender is being paid back in dollars that are worth less than expected, is called:

 

o   credit risk.

o   event risk.

o   inflation risk.

o   default risk.

 

 

 

Question 16

The last American niobium mine closed in 1959, and all U.S. niobium is now imported from other countries. This is:

 

o   bad for the United States because the U.S. must give money to other countries in order to obtain niobium.

o   bad for the United States because the niobium miners were put out of work.

o   good for the United States because the resources used to mine niobium are freed to do something for which the U.S. has a comparative advantage.

o   good for the United States because it is always better to import raw materials from other countries, and export finished goods.

 

 

Question 17

The theory of comparative advantage implies which of the following?

 

o   A country with an absolute advantage in a good will necessarily have a comparative advantage in that good.

o   The gains to trade are exactly offset by the losses from trade.

o   Workers in an industry in which the United States does not have a comparative advantage will be hurt if the U.S. reduces barriers to trade.

o   There are gains to trade for a country as long as that country has a comparative advantage in producing the goods that it imports and exports.

 

 

Question 18

The time value of money is:

 

o   called the credit channel.

o   the opportunity cost of not having your money available to you.

o   also known as the credit score.

o   also known as price appreciation.

 

 

Question 19

The total return on a share of stock is:

 

o   the total of dividends plus the change in the stock price over a year.

o   the original price of the stock, divided by the change in the stock price.

o   the change in the stock price, plus the dividend, divided by the original price.

o   the total of dividends over a year, divided by the change in the stock price.

 

 

Question 20

When an exchange rate changes so that one currency can buy more of another, we say the first currency is ___________ and the second currency is __________.

 

o   depreciating; appreciating

o   appreciating; depreciating

o   pegged; floating

o   floating; pegged

 

 

Question 21

Which of the following best describes inflation risk?

 

o   The chance that a borrower will fail to repay a loan on time or default on the loan

o   The chance that a major destructive event will reduce the rate of return on an investment

o   The chance that the Federal Reserve will reduce the money supply, causing the borrower to have difficulty repaying the loan

o   The danger that the overall price level will rise faster than the lender expected, so that the lender is paid back in dollars that are worth less than expected

 

 

 

 

Question 22

Which of the following is a loan that entitles the lender to get regular interest payments over time, and then get back the principal and the end of the term of the loan?

 

o   A share of stock

o   A bond

o   A mutual fund

o   A revolving credit account

 

 

Question 23

Which of the following is not a type of consumer loan?

 

o   A student loan

o   Credit card purchases for household items

o   A mortgage used to purchase an owner-occupied house

o   A loan taken out by a young entrepreneur to finance the purchase of a lawnmower for a summer landscaping business

 

Question 24

Which of the following is not among the natural barriers to trade?

 

o   Distance

o   Tariffs and quotas

o   Differences in cultures and values

o   The difficulty of delivering services remotely

 

 

Question 25

Which of the following is the best definition of a stock index?

 

o   A measure of the prices of a group of stocks, such as the Dow Jones Industrial Average or the S&P 500

o   A mutual fund made up of a group of stocks and sold through a firm such as Vanguard or Fidelity

o   A category of stocks whose value is indexed to the inflation rate to safeguard the investor against inflation risk

o   A control the Federal Reserve places on the stock market via margin requirements, whereby the Fed indexes margin requirements to inflation

 

 

 

Question 26

Which of the following policies would produce a benefit for American consumers?

 

o   South Korea begins to subsidize its auto exports.

o   The U.S. currency experiences depreciation against the euro.

o   The U.S. government strengthens trade barriers against foreign imports.

o   The Chinese economy begins to grow more slowly than the U.S. economy.

 

 

Question 27

Which of the following statements about venture capital firms is false?

 

o   Venture capital firms get most of their capital from pension funds, large university endowments, and other institutions that can take substantial risks with a small portion of their funds.

o   Most start-up companies that acquire venture capital eventually turn out to be successes.

o   Venture capital firms invest in high-risk, high-potential firms.

o   Companies that acquire their funds from venture capital firms may initially have trouble acquiring capital from other channels.

 

 

 

 

Question 28

Which of the following will not occur when a tariff is imposed on an imported product?

 

o   The price paid by consumers will rise.

o   The level of imports will fall.

o   The price received by importers will fall.

o   The demand curve for imports will shift to the left.

 

 

Question 29

Which of the following would we expect to see for borrowers with a high risk of default?

 

o   A surplus of loans to these borrowers

o   A supply curve that is further to the right than the supply curve for low-risk borrowers

o   A lower interest rate

o   A higher interest rate

 

 

Question 30

Which of the following would you tend to see in a growing economy?

 

o   The demand curve for loans would shift to the right

o   The supply curve for loans would shift to the left

o   The interest rate would tend to fall

o   The quantity of loans would tend to fall