a. high tech stocks
b. starting a new business
c. short-term US Treasury bonds
d. stocks trading off of the major stock exchanges
Q2. Which of the following is an example of market risk?
a. a loss in stock price by a company caused by a faulty product design
b. a loss in stock price due to an interest rate increase by the Federal Reserve Bank
c. a loss in stock price caused by an inefficient sales force
d. a loss in stock price caused by a fire in the factory
Q3. Which of the following is an example of industry risk?
a. Profits for an airline fall because of decreased consumer spending in a recession
b. Profits for an airline fall because of a strike by pilots
c. Profits for an airline fall because fuel prices have gone up
Q4. During periods of rising prices the Federal Reserve is likely to try to fight inflation by raising interest rates.In this scenario, what types of risk are involved?
a. management risk
b. inflation risk only
c. inflation risk and interest rate risk only
d. inflation risk, interest rate risk and tax rate risk
Q5. When a manager adds a new plant in a small city, the effect on the local economy is much greater since all the new workers re-spend much of their salaries in the local economy as well. This is an example of the
a. Multiplier effect
b. Accelerator effect
c. Maximizer effect
d. Machine-tool effect
Q6. Which of the following is most likely to be hurt by inflation?
a. the owner of a restaurant
b. a retired person living on a fixed monthly income
c. a contractor with year-long, fixed-rate contracts
Q7. If the Fed announces an increase in targeted federal funds rates, what is it most likely worried about?
a. an increase in inflation
b. a decrease in inflation
c. an increase in unemployment
d. a decrease in unemployment
Q8. Which of the following is likely to contain the greatest amount of economic information useful to the manager?
a. The local TV evening news
b. the sports pages of the local business weekly
c. the Wall Street Journal
d. all of the above
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