Terms

Question 1

The Sum of probabilities of any set of mutually exclusive and exhaustive events is…

Answer 1

Equal to 1

Question 2

Define Panel Data

Answer 2

Consist of observations through time on one or more variable for multiple observational units

Question 3

Define Time Series Data

Answer 3

Sequence of observed data for a single observatory unit of a specific variable collected over time and at discrete equally space interval of time. Ex. Daily,weekly,monthly,annually, or quarterly

Question 4

Define cross-sectional data

Answer 4

list of observations of a specific variable from multiple observational units at a given point in time

Question 5

Bar Chart

Answer 5

Provides a snapshot to show comparisons in between categories of data

Question 6

Line Chart

Answer 6

Best for making comparisons over time. Used to visualized ordered observations

Question 7

Histogram

Answer 7

Best to display distributions of data, not comparisons amongst categorical data

Question 8

If the reduction of a product’s price increases total revenue, demand is best described as:

Answer 8

Elastic. A product’s demand is elastic if demand increases by a greater percentage than the percentage price change when prices are reduced. For example, if a 1 percent price reduction increases the quantity sold by more than 1 percent, total revenue increases and demand is said to be elastic.

Question 9

Which of the following factors is most likely to lead to economies of scale? 1. Supply constraints
2. Duplication of product lines
3. Specialization by workers

Answer 9

3. Specialization by workers. can increase their proficiency, leading to lower average costs when the firm is large enough to allow specialization.

Question 10

What does price elasticity of demand depend on?

Answer 10

depends on the length of time within which the demand schedule is being considered.

Question 11

A firm in an oligopoly market most likely faces a kinked demand curve because competitors do not match:

Answer 11

Price increases. “[t]he most common pricing strategy assumption in these [oligopoly] price war markets is that competitors will match a price reduction and ignore a price increase. … This oligopolistic pricing strategy results in a kinked demand curve, with the two segments representing the different competitor reactions to price changes.”

Question 12

A recessionary gap:

1. occurs due to a vertical long-run aggregate supply curve.
2. is the amount by which actual GDP falls below potential GDP.
3. occurs due to a rightward shift in the aggregate demand curve.

Answer 12

B. Is the amount by which actual GDP falls below potential GDP

Question 13

Which of the following is least likely to affect the growth of the economy?
1. The workforce attending an average of 20 hours of training per year
2. When capital depreciation exceeds gross investment within the economy
3. An increase in the labor force that is offset by a decrease in the average hours worked per worker, making the total hours worked unchanged

Answer 13

3. An increase in the labor force that is offset by a decrease in the average hours worked per worker, making the total hours worked unchanged

Question 14

In the recovery phase of the business cycle, the economy is most likely:

1. enjoying an upswing and a positive output gap opens.
2. going through a trough and a 3. positive output gap opens.
   going through a trough and a negative output gap starts to narrow.

Answer 14

3. Going through a through and a negative output gap starts to narrow. Economic activity, including consumer and business spending, is below potential but is starting to increase, closing the negative output gap.”

Question 15

In a fractional reserve banking system, the reserve requirement is:

1. equal to the money multiplier.
2. the fraction of deposits that may be lent out.
3. inversely correlated with potential money creation.

Answer 15

inversely correlated with potential money creation.
ew deposit/Reserve requirement = €100/0.10 = €1,000.” This formula shows that if the reserve requirement is increased, money creation will decrease, thereby exhibiting an inverse relationship.

Question 16

Role of a central bank in the economy

Answer 16

A monopoly supplier of a country’s currency

Question 17

Assume that a central bank has decided to lower interest rates in the economy. To carry out this policy, the central bank will most likely:

increase required reserve requirements.
buy securities.
sell securities.

Answer 17

Buy Securities

Question 18

Which of the following acts as an automatic stabilizer for the economy?

1. A decrease in corporate tax rates
2. New public spending on hospitals
3. Government expenditure on unemployment benefits

Answer 18

3. Government expenditure on unemployment benefits

Question 19

Cyber threats are most likely an example of:

event risk.
thematic risk.
exogenous risk.

Answer 19

Thematic risk. [c]yber threats are another example of thematic risk. Cyber risks include any attempt to expose, alter, disable, destroy, steal, or gain information through unauthorized access to or unauthorized use of computer systems.

Question 20

Which statement about the Ricardian model of trade is most accurate? The model:

1. allows for a redistribution of income through trade.
2. incorporates the benefit of technology in labor productivity.
3. predicts that a country with abundant labor resources relative to capital will likely export labor-intensive goods and import capital-intensive goods.

Answer 20

incorporates the benefit of technology in labor productivity.

In the Ricardian model of trade, labor is the only input and the benefit of technology is reflected in labor productivity.

Question 21

Which of the following is considered an integral part of a complete set of financial statements?

Auditor’s report
Management commentary
Notes to the financial statements

Answer 21

Notes to the financial statements

Question 22

According to the International Accounting Standards Board’s Conceptual Framework for Financial Reporting, which of the following is a fundamental qualitative characteristic that makes financial information useful?

Answer 22

Relevance

Question 23

Under US GAAP, which of the following should be reported separately from continuing operations on the income statement?

Answer 23

Results of discontinued operations

Question 24

Debt with a maturity date beyond a company’s next operating cycle is most likely classified as a component of:

Answer 24

Non-current liabilities.

Non-current liabilities include all liabilities not expected to be settled within one year or within one operating cycle of a business. These include financial liabilities such as debt with a maturity date beyond a company’s next operating cycle.

Question 25

Interest payable decreased during a company’s fiscal year. Compared with the amount of cash interest payments made, interest expense is most likely:

Answer 25

Lower

Question 26

Compared with its net income, a mature company’s operating cash flow is most likely:

Answer 26

Higher.

For a mature company, because net income includes non-cash expenses (depreciation and amortization), operating cash flow typically exceeds net income.

Question 27

During a period of declining prices, a company using the last-in, first-out (LIFO) inventory method instead of first-in, first-out (FIFO) method will most likely report a lower value for:

Answer 27

Cost of goods sold.

If prices are declining, using LIFO would match the lower (most recent) costs with current sales. Compared with using FIFO, costs of goods sold would be lower, and gross profit (income) would be higher when using LIFO. Lower cost of goods sold means inventory balances, consisting of older, higher-priced items, would be higher using LIFO, increasing current assets relative to FIFO.

Question 28

A company depreciates its asset base at 8% per year for accounting purposes and 12% per year for tax purposes. No prior period deferred taxes have been reported. If it is doubtful that future economic benefits will be realized from the temporary difference, the company should

Answer 28

Not recognize a deferred tax item

Question 29

Which of the following most likely provides an opportunity for a company’s management to issue low-quality financial reports?

1. Ineffective board of directors
2. Concern about future career opportunities
3. Incentive compensation based on earnings

Answer 29

1. Ineffective board of directors.

typically, three conditions exist when low-quality financial reports are issued: opportunity, motivation, and rationalization. Opportunity can be the result of internal
conditions, such as poor internal controls or an ineffective board of directors

Question 30

At the time of issue, for a corporate bond that sells at par, the liability on the issuer’s balance sheet would be

Answer 30

Equal to face value

Question 31

The nominal risk-free rate is best described as the sum of the real risk-free rate and a premium for:

Answer 31

Expected inflation

Question 32

Which of the following risk premiums is most relevant in explaining the difference in yields between 30-year bonds issued by the US Treasury and 30-year bonds issued by a small private issuer?

Answer 32

Liquidity.

US Treasury bonds are highly liquid, whereas the bonds of small issuers trade infrequently and the interest rate includes a liquidity premium. This liquidity premium reflects the relatively high costs (including the impact on price) of selling a position.

Question 33

Operating Activities

Answer 33

refer to the day to day core business activities of a company

Question 34

Investing Activities

Answer 34

relate to the acquisitions or disposal

Question 35

Financing Activites

Answer 35

relate to the injection or repayment of capital

Question 36

Unqualified Opinion

Answer 36

states that the financial statements have been presented fairly in accordance with the auditor’s findings

Question 37

Qualified opinion

Answer 37

states the financial statements have been presented fairly but do certain exceptions to the accounting standards

Question 38

Adverse opinion

Answer 38

states that the financial statements have not been presented fairly and significantly deviate from acceptable accounting standards

Question 39

Disclaimer of opinion

Answer 39

issued when the auditor, is not able to issue an opinion on the financial statements

Question 40

Leptokurtic

Answer 40

fat-tailed. A distribution with a fatter tail

Question 41

Mesokustic

Answer 41

frequency distribution that is neither flatter nor more peaked than the normal distribution. It has kurtosis

Question 42

Platykurtic

Answer 42

Describes a distribution that has less weight in the tail than the normal distribution (thin-tailed)

Question 43

Hello

Answer 43

Hi