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1) Which is NOT an example of direct investment?
a) A couple investing their savings in a home
b) A government investing in a new highway or hospital
c) A domestic or foreign company paying start-up costs for a plant to produce a new
product
d) An individual investing in a mutual fund
2) What key fact distinguishes a principal from an agent?
a) The principal needs the agent to undertake trading
b) The principal owns the securities to be traded
c) The principal earns a commission on trades
d) The principal runs a lower risk than an agent
3) Which of the following is NOT true?
a) Higher interest rates compensate for a higher risk of default.
b) Lower interest rates should increase GDP, because the cost of borrowing for
businesses.
c) Higher interest rates encourage companies to spend now.
d) Higher domestic interest rates attract foreign capital, helping to increase the exchange
rate.
4) Which of the following statements is true regarding business cycle indicators?
I. Employment is a leading indicator, the unemployment rate is a lagging
indicator
II. Inflation is a lagging indicator
III. Stock prices are a leading indicator, personal income is a coincident indicator
IV. Industrial production, retail sales, and capital spending are leading indicators
a) I, II, and III
b) II and IV
c) I only
d) II only
5) The Gross National Product Index (GNP) is the most widely used indicators of
inflation and is considered a measure of the cost of living in Canada.
a) True
b) False
6) Which of the following is a leading indicator?
a) GDP
b) Level of inventories
c) Personal income
d) Housing starts
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