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Exam 12: Macroeconomic and Industry Analysis

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Question 1

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A top-down analysis of a firm's prospects starts with an analysis of the ________.

A) firm's position in its industry
B) local economy or even the global economy
C) industry
D) specific firm under consideration

E) B) and C)
F) A) and D)

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B

Question 2

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The nominal interest rate is 10%. The real interest rate is 4%. The inflation rate must be ________.

A) -6.00%
B) 4.00%
C) 5.77%
D) 14.40% inflation

E) None of the above
F) All of the above

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Question 3

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Which one of the following shares represents industries with below-average sensitivity to the state of the economy?

Firm A produces gadgets. The price of gadgets is $2 each. Firm A has total fixed costs of $1 000 000 and variable costs of $1.00 per gadget. The corporate tax rate is 40%. If the economy is strong, the firm will sell 2 000 000 gadgets. If the economy enters a recession it will sell only half as many gadgets. If the economy enters a recession, the after-tax profit of Firm A will be ________.

Inflation is caused by ________.

A supply-side economist would likely agree with which of the following statements?

The nominal interest rate is 6%. The inflation rate is 3%. The exact real interest rate must be ________.

The goal of supply-side policies is to ________.

The expansion of the money supply at a rate that exceeds the increase in goods and services will likely result in ________.

In macroeconomic terms an increase in the price of imported oil or a decrease in the availability of oil is an example of a ________.

An industry analysis for manufacturers of a small personal care gadget observed the following characteristics: 1) Industry sales have grown at 15-20% per year in recent years and are expected to grow at 10-15% per year over the next three years, still well above the economic growth rate. 2) Some US manufacturers are attempting to enter fast-growing non-US markets, which remain largely unexploited. 3) Some manufacturers have created a new niche in the industry by selling directly to customers through mail order. Sales for this industry segment are growing at 40% per year. 4) The current penetration rate in the US is 60% of households and will be difficult to increase. 5) Manufacturers compete fiercely on the basis of price, and price wars within the industry are common. 6) Some manufacturers are able to develop new, unexploited niche markets in the US based on company reputation, quality and service. 7) Several manufacturers have recently merged, and it is expected that consolidation in the industry will increase. 8) New manufacturers continue to enter the market. Characteristics ________ would be typical of an industry that is in the consolidation stage.

An industry analysis for manufacturers of a small personal care gadget observed the following characteristics: 1) Industry sales have grown at 15-20% per year in recent years and are expected to grow at 10-15% per year over the next three years, still well above the economic growth rate. 2) Some US manufacturers are attempting to enter fast-growing non-US markets, which remain largely unexploited. 3) Some manufacturers have created a new niche in the industry by selling directly to customers through mail order. Sales for this industry segment are growing at 40% per year. 4) The current penetration rate in the US is 60% of households and will be difficult to increase. 5) Manufacturers compete fiercely on the basis of price, and price wars within the industry are common. 6) Some manufacturers are able to develop new, unexploited niche markets in the US based on company reputation, quality and service. 7) Several manufacturers have recently merged, and it is expected that consolidation in the industry will increase. 8) New manufacturers continue to enter the market. Characteristics 4 and 5 would indicate that the industry is in the ________ stage.

Which of the following affects a firm's sensitivity of its earnings to the business cycle? i. Financial leverage II. Operating leverage III. Type of product

An industry analysis for manufacturers of a small personal care gadget observed the following characteristics: 1) Industry sales have grown at 15-20% per year in recent years and are expected to grow at 10-15% per year over the next three years, still well above the economic growth rate. 2) Some US manufacturers are attempting to enter fast-growing non-US markets, which remain largely unexploited. 3) Some manufacturers have created a new niche in the industry by selling directly to customers through mail order. Sales for this industry segment are growing at 40% per year. 4) The current penetration rate in the US is 60% of households and will be difficult to increase. 5) Manufacturers compete fiercely on the basis of price, and price wars within the industry are common. 6) Some manufacturers are able to develop new, unexploited niche markets in the US based on company reputation, quality and service. 7) Several manufacturers have recently merged, and it is expected that consolidation in the industry will increase. 8) New manufacturers continue to enter the market. Characteristics ________ would be typical of an industry that is in the start-up stage.

Which one of the following describes the amount by which government spending exceeds government revenues?

The market value of all goods and services produced during a given time period is called ________.

A big increase in government spending is an example of ________.

The decline in the value of the Australian dollar relative to the yen will have what impact on the purchase of Australian goods in Japan?

An investment strategy which entails shifting the portfolio into industry sectors that are forecast to outperform others based on macroeconomic forecasts is termed ________.

Stalwarts are typically found in the ________ stage of the industry life cycle.