Exercise
Answer the Following Questions
- 1. The four stages of the business cycle are:
- A. Expansion, contraction, recession, trough
- B. Expansion, peak, contraction, trough
- C. Expansion, peak, contraction, depression
- D. Expansion, contraction, recession, depression
- 2. Non-cyclical stocks are also known as:
- A. Defense stocks
- B. Coincident stocks
- C. Defensive stocks
- D. Indicator stocks
- 3. Which of the following leading indicators does not indicate an expansion of the economy?
- A. Growing business inventories
- B. Increase in building permits
- C. Decrease in unemployment claims
- D. Narrowing liquidity spread
- 4. Assuming these are all equally available and you have equal knowledge of each and their relationship to the economy, which of the following indicators would be the best predictor of future expansion in the economy?
- A. Prime rate charged by banks
- B. Employment cost index
- C. Performance of the S&P 500
- D. Producer Price Index
- 5. Why are housing starts an important leading indicator?
- I. Because construction projects take at least a few months, housing starts indicate optimism on the part of investors and consumers.
- II. Construction projects have a ripple effect—new workers may be hired and materials must be purchased, boosting the economy.
- III. Housing is the biggest industry within the GDP.
- IV. The Fed may react by reducing interest rates to make money less expensive to businesses and potential homeowners.
- A. I and IV
- B. I and II
- C. II and III
- D. III and IV
