Macroanalysis

Question 1

Nominal int. rate formula vs real interest rate formula

Answer 1

Nominal int. rate = Real rate + price level

Real int. Rate = Nominal Int. Rate – price level

Question 2

The government´s budget deficit is

Answer 2

the difference between government spending and revenues.

Question 3

Cyclical Industries

Answer 3

those with an above average sensitivity to the macroeconomic environment

Question 3

BUSINESS CYCLES

The bottom of the recessionary trend is called the

Answer 3

trough

Question 4

Defensive Industries

Answer 4

generate a stable flow of income and profits through the cycle. Examples of this type are food producers and processors, pharmaceuticals and utilities. These are the kind of industries that will perform well in a recession. This firms will tend to be Low Beta stocks.

Question 5

ISM / PMI Manufacturing and Services Indices

Answer 5

calculate new orders at a number of manufacturing and non manufacturing firms

Question 6

the stock market should be …

Answer 6

a “near efficient” predictor of future profits

Question 7

Sector Rotation

Answer 7

shift the portfolio more heavily into industries or sectors that are expected to outperform depending on the state of the business cycle

Question 8

Consolidation Stage

Answer 8

Industry leaders emerge, earnings become more stable and market share is easier to predict. The industry continues to grow faster than the rest of the economy.