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Principles of Finance

Multiple Choice

Principles of FinanceMultiple Choice
1 .
Demand is the _______________.
  1. amount of a good or service that consumers need
  2. amount of a good or service that consumers want to purchase at the equilibrium price
  3. quantity of a good or service that consumers want to purchase minus the amount that producers are currently supplying
  4. quantity of a good or service that consumers are willing to purchase at various prices over a given time period, ceteris paribus
2 .
An increase in supply will lead to _______________.
  1. a lower equilibrium price and a lower equilibrium quantity
  2. a higher equilibrium price and a lower equilibrium quantity
  3. a higher equilibrium price and a higher equilibrium quantity
  4. a lower equilibrium price and a higher equilibrium quantity
3 .
An increase in the price of a basket of goods is known as _______________.
  1. inflation
  2. falling GDP
  3. rising GDP
  4. a change in quantity demanded
4 .
The unemployment rate equals _______________.
  1. the number of people unemployed divided by the labor force
  2. the number of people seeking work divided by the adult population
  3. the number of people unemployed divided by the number of people employed
  4. the number of people unemployed plus the number of people working part-time divided by the adult population
5 .
To be considered unemployed, an individual must be _______________.
  1. out of work
  2. actively seeking a job
  3. able to work
  4. All of the above
6 .
When measuring GDP, purchases are divided into the four broad categories of _______________.
  1. interest rates, inflation, unemployment, and investment
  2. demand, inflation, interest rates, and government spending
  3. imports, exports, loanable funds, and government spending
  4. consumer spending, investment, government spending, and net exports
7 .
A business cycle is measured from _______________.
  1. one peak to the next trough
  2. one trough to the next trough
  3. one trough to the next peak
  4. the time of the highest unemployment rate to the time of the lowest unemployment rate
8 .
Which of the following economic environments would most likely be associated with a recession?
  1. Unemployment falling to 30-year low
  2. GDP growing at an annual rate of 4.2%
  3. Unemployment increasing from 5% to 9% during the year
  4. New businesses opening in record numbers while new housing starts reach a 10-year high
9 .
The interest rate is the _______________.
  1. rental cost of money
  2. increase in the price of a market basket of goods
  3. measure of economic activity
  4. speed at which the money supply is increasing
10 .
If the nominal interest rate is 9% and the rate of inflation is 2%, the real rate of interest is approximately _______________.
  1. 2 9 %
  2. 7%
  3. 11%
  4. 18%
11 .
A foreign exchange rate is _______________.
  1. the rate of inflation in a foreign country
  2. the amount of imports a country has relative to its exports
  3. the price of one currency in terms of another currency
  4. the rate of unemployment in one country compared to the rate in another country
12 .
In 2020, the CPI in a country is 120. In 2021, the CPI in the same country is 126. This would mean that inflation is _______________.
  1. 5%
  2. 6%
  3. 26%
  4. 46%
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