Financial Planning II 4.05

The unemployment rate in the last quarter jumps to 5.6% in Jeremy's country. How does this change affect the financial markets?

• The market is unable to handle such an unemployment rate and would most likely crash.

• Securities prices would fall as fewer people have the income to invest due to lost wages.

• People would begin to invest in more start-up companies to try to make up for lost wages.

• There would be no change in the financial markets due to the higher unemployment.

Individuals who take advantage of price differences to buy and sell securities from different markets are said to be using:

• arbitrage.

• bankruptcy.

• a yield curve.

• business cycles.

What step can financial services companies take to protect clients' online business transactions from hackers?

• limit the number of client transactions

• avoid encryption methods

• use intranet capabilities

• install firewalls

What is the difference between real GDP and nominal GDP?

• Real GDP only calculates the top 100 companies in the country for a given period.

• Nominal GDP does not consider how inflation or deflation affects the price of goods over time.

• Nominal GDP does not consider the production of companies that have existed for less than three years.

• Real GDP does not involve a calculation of the increase in price that is the consequence of inflation or deflation in the economy.

A strong U.S. dollar is an advantage to the U.S. economy because:

• it is indirectly correlated to the volume of imports and exports.

• it allows the United States to export more products and services.

• it allows the United States to import more products and services.

• it means vacationing here will be cheaper for people from other countries.

What is the main cause of business cycles?

• variations in money supply

• fluctuation in consumer spending

• major innovations in infrastructure

• population growth exceeding supply