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series 7 take 2 > economics and analysis > Flashcards

economics and analysis Flashcards

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Series 7 Top-off Exam flashcards
1
Q

GDP

A
  • total value of all good and services

- published quarterly

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2
Q

CPI

A
  • consumer price index
  • is a measure of inflation
  • published daily
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3
Q

describe an ideal economy

A
  • GDP is up
  • CPI is down
  • moderate inflation
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4
Q

describe a general business cycle

A
  • expansion-goes up
  • peak-prosperity
  • decline-goes down
  • trough
  • recovery-moves back up
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5
Q

what are the 5 leading economic indicators

A
  • building permits
  • manufacturers’ new orders
  • S&P 500 index
  • M2 (money supply)
  • new unemployment claims
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6
Q

what are the 4 coincident economic indicators

A
  • GDP
  • industrial production
  • personal income
  • manufacturing and trade sales
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7
Q

what are the 2 lagging economic indicators

A
  • corporate profits

- duration of unemployment

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8
Q

what 3 things can influence the economy

A
  • fiscal policy (congress/president)
  • monetary policy (federal reserve)
  • federal reserve
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9
Q

how does fiscal policy affect economy

A
  • taxation (high = deflation, low = inflation)

- government spending

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10
Q

what is keynesian theory?

A

active government manipulation of the economy

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11
Q

describe M1 money supply

A

cash + demand deposits (checking accounts)

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12
Q

describe M2 money supply

A

M1 + CDs + money market mutual funds

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13
Q

describe M3 money supply

A

M2 + negotiable CDs

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14
Q

what are the tools that the federal reserve board can use to influence economy?

A
  • multipliers
  • federal funds
  • discount rate
  • open market operations
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15
Q

federal reserve board has control over?

A

bank reserve requirements

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16
Q

describe the multiplier FRB tool

A
  • is the most drastic tool

- changes reserve requirements banks must have in their position

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17
Q

describe the fed funds FRB tool

A

-bank’s excess reserves to lend

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18
Q

describe the discount rate FRB tool

A
  • rate charged from feds to banks for loaning

- all rates are affected by the discount rate

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19
Q

describe the open market operations FRB tool

A
  • fed buys t-bills from institutions to make interest rate go down
  • fed sells t-bills to institutions to make interest rate go up
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20
Q

what happens if the value of a dollar goes up

A
  • exports less competitive

- imports more competitive

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21
Q

what happens if the value of a dollar goes down

A
  • exports more competitive

- imports less competitve

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22
Q

what are defensive (noncyclical) securities

A

basic human needs

  • food
  • utilities
  • clothing
  • drugs
  • tobacco
  • liquor
  • cosmetics
23
Q

what are cyclical securities

A

can go way up or way down

  • steel
  • heavy equipment
  • capital goods
  • automobiles
  • toy companies
24
Q

what are countercyclical securities

A

-precious metals (gold)

25
Q

assets=

A

liabilities + net worth

26
Q

net worth=

A

assets - liabilities

27
Q

working capital=

A

current assets - current liabilities

28
Q

current ratio=

A

current assets / current liabilities

29
Q

debt ratio=

A

long term debt / total capitalization

30
Q

earnings per share=

A

net income / # of common shares

31
Q

price to earnings ratio=

A

current market value / earnings per share

32
Q

dividend payout ratio=

A

common dividends / earnings per share

33
Q

when analyzing the market technically, what would a person use?

A
  • price forecasting

- timing

34
Q

what is the odd lot trading theory?

A

says to do the opposite of what the little guys are doing

35
Q

what are the 4 market indiices

A
  • dow jones composite
  • nyse composite
  • wilshire
  • S&P
36
Q

describe the components of the dow jones composite

A

-looks at 65 companies
30-industrials
20-transportation
15-utilities

37
Q

how many companies make up the NYSE composite?

A

3,000+

38
Q

how many companies make up the Wilshire composite?

A

5,000

39
Q

how many companies make up the S&P?

A

500

40
Q

what kind of recommendation for growth objectives?

A

-growth mutual fund and reinvest earnings

41
Q

what kind of recommendation for income objectives?

A

-income funds and dont reinvest earnings

42
Q

what kind of recommendation for preserving capital objectives?

A
  • govt
  • govt backed
  • blue chip stocks
43
Q

what kind of recommendation for liquidity objectives?

A
  • money markets
  • IRAs, keoughs
  • Roth IRAs
44
Q

what is credit risk?

A

risk of company going bankrupt

45
Q

what is business risk?

A

risk of industry doing poorly

46
Q

what is market risk?

A

risk of market decline

47
Q

what is purchasing power risk?

A

has to do with inflation risk

48
Q

what is marketability risk?

A

ability to resale security

49
Q

what is taxed as ordinary income?

A

earned money

  • salaries
  • wages
  • commissions
  • bonuses
50
Q

describe passive income

A

says that passive losses can only be used to offset passive income

51
Q

what is the 30 day wash rule

A
  • investor exits position with a loss, then reestablishes position in an identical security with 30 days before or after trade
  • NOT ALLOWED
52
Q

what are examples of progressive taxes?

A
  • income
  • estate
  • gift
53
Q

what are examples of regressive taxes?

A
  • sales

- fuel

series 7 take 2 (17 decks)

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