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21.Suppose the Federal funds rate is 5 percent. If the Fed decides to decrease the target for the Federal funds rate from 5 percent to 4 percent, it should take:
A) a defensive action and raise reserve requirements.
B) a defensive action and reduce reserve requirements.
C) an offensive action and raise reserve requirements.
D) an offensive action and reduce reserve requirements.
Suppose that investment is not very responsive to interest rates, so that a sizable increase in interest rates has only a minor effect on investment. In this case, monetary policy would have:
A) no effect on output.

B) a modest effect on output at best.
C) a substantial effect on output.
D) a massive effect on output.
Monetary policy that seeks to minimize the business cycle in the AS/AD model involves:
A) monetary policy throughout the business cycle.
B) expansionary monetary policy throughout the business cycle.
C) contractionary monetary policy during boom periods and expansionary monetary policy during recession.
D) contractionary monetary policy during recession and expansionary monetary policy during boom periods.
Suppose inflation is expected to be 5 percent but it is actually 3 percent. The people who lose from the difference between actual and expected inflation are most likely to be the:
A) owners of firms and lenders.
B) owners of firms and borrowers.
C) workers and lenders.
D) workers and borrowers.

During the Great Depression of the 1930s, the U.S. experienced deflation. Partly as a consequence of this, nearly half the banks in the U.S. failed during this period. Deflation contributes to bank failures by:
A) increasing consumer spending and aggregate demand.
B) reducing real interest rates.
C) reducing asset prices and bank loan collateral.
D) preventing the central bank from reducing nominal interest rates.

Annual inflation in Zimbabwe was 32 percent in 1998, 383 percent in 2003, and increased to more than 100,000 percent in 2009. What would a classical economist who sees great merit in the quantity theory of money look for in trying to explain this rise in inflation?
A) A poor distribution of income.
B) A very low rate of unemployment.
C) Very low interest rates.
D) A rapid increase in the quantity of money in circulation.

In January 2009, Zimbabwe reached about a 100,000 percent inflation rate, with the economy on the verge of bartering. At this level of inflation, why is the central bank of Zimbabwe not exercising a contractionary monetary policy?
A) The central bank of this country does not believe in the equation of exchange.
B) The authorities believe that there is no direct relationship between money supply and inflation.
C) The government and the central bank have full control of its spending.
D) The political structure of this country is such that excessive budget deficits are constantly financed with bonds bought by the central bank.

Velocity can be calculated as the ratio of:
A) nominal GDP to real GNP.
B) nominal GDP to the money supply.
C) real GDP to the price level.
D) the money supply to the price level.

The inflation tax is:
A) an implicit tax on the holders of cash and the holders of any obligations specified in real terms.
B) an implicit tax on the holders of cash and the holders of any obligations specified in nominal terms.
C) an explicit tax on wealth.
D) an explicit tax on consumption.

In the early 1980s, inflation in the U.S. fell from over 10 percent to under 5 percent while unemployment increased from 6 percent to 10 percent. These changes can be represented by a movement along:
A) the short-run Phillips curve.
B) the long-run Phillips curve.
C) both the short-run and long-run Phillips curves.
D) neither the short-run nor the long-run Phillips curves.

Based on the long-run Phillips curve, we can conclude that expected inflation plays:
A) no role in determining inflation.
B) a minor role in determining inflation.
C) an important role in determining inflation.
D) an uncertain role in determining inflation.
Assuming the central bank is interested in both inflation and unemployment, what options does a central bank have in dealing with a supply-side shock?
A) None. The central bank influences the demand side, so can do nothing to counteract the effects of a supply-side shock.
B) It can completely offset the effects of the shock with expansionary monetary policy.
C) It can completely offset the effects of the shock with contractionary monetary policy.
D) It faces a dilemma: if it corrects one problem, it makes the other problem worse.

If an economy operates below potential income, the actual deficit is:
A) smaller than the structural deficit.
B) larger than the structural deficit.
C) the same as the structural deficit.
D) comparable to the structural deficit.

In 2007, the U.S. economy was operating close to potential. The budget deficits experienced by the U.S. in 2007 was:
A) primarily passive deficits.
B) primarily structural deficits.
C) neither structural nor passive deficits.
D) about evenly split between structural and passive deficits.

Economists generally are:
A) more concerned about structural deficits than passive deficits.
B) equally concerned about structural and passive deficits.
C) more concerned about passive deficits than structural deficits.
D) not concerned about structural or passive deficits.

If inflation is correctly anticipated, those who buy government bonds will:
A) suffer losses regardless of inflation because interest paid on government bonds is set by Congress.
B) not suffer losses because inflation does not affect the purchasing power.
C) suffer losses because they will be compensated by lower interest payments.
D) not suffer losses because they will be compensated by higher interest payments.

Government debt is defined as:
A) a shortfall of incoming revenue under outgoing payment.
B) a shortfall of outgoing payments under incoming revenue.
C) accumulated deficits minus accumulated surpluses.
D) accumulated deficits plus accumulated surpluses.

One of the reasons government debt is different from individual debt is:
A) government does not pay interest on its debt.
B) government never really needs to pay back its debt.
C) all government debt is owed to other government agencies.
D) the government debt is unrelated to income.

Debt is measured relative to GDP because:
A) the ability of a country to pay off its debt depends on its productive capacity.
B) the ability to produce output depends on the size of the nation's debt.
C) GDP is always used as a reference point in economics.
D) as long as this ratio remains high, the government will have no trouble repaying the debt.

Paying interest on external government debt rather than on domestic debt produces:
A) a net reduction in domestic income.
B) a redistribution of income within the country.
C) a net increase in domestic income.
D) no change in the level or distribution of domestic income.

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A Variety of Marketing-Related Multiple Choice Questions

Markets are similar to products with respect to life-cycle concepts. All of the following are considered to be stages that markets pass through in market evolution EXCEPT ________.

a. emergence
b. destruction
c. growth
d. decline

_______ measures a product's handling costs from the time the product reaches the warehouse until a customer buys it in the retail store.

Brand management
Shelf management
Direct Product Performance
Direct Product Profitability

Most products are established at one of four performance levels: low, average, high or superior. For example, mountain bikes come in a variety of sizes and physical attributes. When a consumer purchases a mountain bike costing $1,000 she/he expects the bike to perform to specifications and to have a high ________ meeting the promised specifications.

An alternative formulation to customer equity is provided by Blattberg, Getz, and Thomas. They view customer equity as being driven by three components: acquisition, ________, and add-on selling.

a. satisfaction
b. retention
c. quality
d. pricing

By adding more channels, companies can gain three important benefits. First, they can increase their market coverage, second, they can lower channel costs by moving to a lower cost channel, and third they can provide ________.

a. effective dollar costs/sale
b. increased volume of sales
c. more customized selling
d. increased exposure

Your product enjoys high brand loyalty and high involvement in the category. Your product has perceived differences that consumers recognize between brands. Your product is one of the few that its consumers choose before selecting the retail store/Web site to purchase the product. Which promotion strategy would hold the greatest opportunity for incremental sales for your product based upon the consumer criteria above?

a. Hybrid
b. Branding
c. Pull
d. Push

Companies that practice ________ are implementing a total market orientation and are likely to be the most successful.

reactive market orientation
proactive marketing orientation
both reactive and proactive marketing orientation
"invent and market"

A customer's decision to be loyal or to defect is the sum of many small encounters with the company. Consulting firm Forum Corporation says that in order for all these small encounters to add up to customer loyalty, companies need to create ________.

a reward program
a branded customer experience
strong word-of-mouth promotions
a top-notch advertising campaign

____________is the set of measures that helps quantify, compare, and interpret marketing performance.

sales analysis
customer performance scorecard
performance dashboard
marketing metrics

________ is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

Customer retention

A ________ strategy involves the manufacturer using its sales force and trade promotion money to induce intermediaries to carry, promote, and sell the product to end users.

none of the above

The formula for the break-even calculation is ________.

fixed costs/(variable costs - price)
(price - variable costs)/fixed costs
fixed costs/(price - variable costs)
fixed costs/unit sales

When McDonald's used mystery shoppers to assess stores' internal speed standards, McDonald's was using which of the following steps to improve its marketing intelligence system?

A company can train and motivate the sales force to spot and report new developments.
A company can network externally.
A company can motivate distributors, retailers, and other intermediaries to pass along important intelligence.
A company can take advantage of government data sources.

Marketers must be concerned with transportation decisions. Transportation choices will affect product ________, on-time delivery performance, and the conditions of the goods when they arrive, all of which affects customer satisfaction.

none of the above

One of the don'ts of questionnaire construction is to ensure that fixed responses do not overlap. Which of the following is the best illustration of a problem that this "don't" might cause?

A consumer must describe a cartoon about buying a car.
An income question asks for an income designation in one of the following income categories: $0-$20,000, $20,000-$40,000, or $40,000 and above.
A consumer is asked whether or not he or she could spy on another consumer's shopping experience.
A consumer is asked to describe a recent event will driving.

________ can be defined as the differential effect that brand knowledge has on consumer response to the marketing of that brand.

Consumer-based brand equity
Function-based brand equity
Service-driven brand equity
Mission-driven brand equity

Customers must see any competitive advantage as a ________ advantage for it to be effective.


Consumer reference prices includes all of the following EXCEPT:

"fair price"
product price
last price paid
typical price

Sony's former president, Akio Morita, wanted everyone to have access to "personal portable sound," so his company created the Walkman and portable CD player. Which of the following planning aids most likely assisted Mr. Morita with his vision?

The mission statement.
A SWOT analysis.
A database.
Knowledge of customers.

If a marketing manager employs such marketing techniques as online buzz, student ambassadors, cool events, and street teams to reach target markets, the manager is most likely appealing to the ________ market.

Generation Y
Generation Z
Generation X

The ________ is the rate at which the buyer forgets the brand.

purchase frequency
designated rate
purge rate
forgetting rate

One of the benefits of interactive marketing is that it is highly accountable and its ________ can be easily traced.


________ requires that everyone in the organization buy into the concepts and goals of marketing and engage in choosing, providing, and communicating customer value.

Integrated marketing communications
Sales department
Internal marketing
External relations

All of the following are considered to be advantages of online research EXCEPT ________.

online research is inexpensive
online research is prone to technological problems and inconsistencies
online research is more versatile
online research is faster

Three pillars that point to the brand's future value, rather than just reflecting its past, are differentiation, energy and relevance. Differentiation, energy and relevance combine to determine what is called Energized Brand ________.


Many countries have ________ industries to create greater competition and growth opportunities.

scientifically segmented

According to "The Law of the Few", three types of people help to spread an idea like an epidemic. They include connectors, salesmen, and ___________.

news people

During which step of the segmentation process would the marketer group customers into segments based on similar needs and benefits sought by the customer in solving a particular consumption problem?

Step 1: needs-based segmentation
Step 3: segment attractiveness
Step 2: segment identification
Step 7: marketing-mix strategy

With regards to product-line pricing, companies normally develop product lines rather than single products and introduce price steps. The seller's task is to establish ________ quality differences between these price steps.


A conventional marketing channel comprises an ________, wholesaler(s), and retailer(s) each acting in his own self-interest.

independent producer
merchant wholesalers
manufacturing representatives

Marketing is not a department so much as a ________.

company orientation
branch of economics

Once the target market is defined, the marketer needs to obtain specific names. The company's best prospects are customers who have bought in the past. Additional names can be obtained by purchasing a list of names. The better lists include overlays of ________ and ________ information

a. demographic/attitudes
b. demographic/psychographic
c. financial/buying groups
d. demographic/financial

The majority of sales representatives require encouragement and special incentives. To increase motivation, marketers reinforce intrinsic and ________ rewards of all types.


According to the illustrations describing the product life cycle, during which stage of the cycle is there a strong likelihood that negative profits will be the norm?


________ communicates to the market the company's intended value positioning of its product or brand.

Physical evidence

In which of the following dimensions of holistic marketing might we find the focus on the marketing mix tools?

Integrated marketing
Internal marketing
Relationship marketing
Socially Responsive marketing

If a marketing researcher selects the most accessible population members, he or she would have selected the ________ sampling method.

simple random
stratified random

________ is a comprehensive systematic, independent, and periodic examination of a company's or business unit's marketing environment, objectives, strategies, and activities with a view to determining problem areas and opportunities and recommending a plan of action to improve the company's marketing performance.

Marketing audit
Marketing plan
Marketing management
Marketing metrics

________ can be defined as the ability to alter channel members' behavior so that they take actions they would not have taken otherwise.

Channel power
Channel relationships
Channel concerns

From a branding perspective, "green marketing" programs have not been entirely successful. ________ has been cited as one of the obstacles that must be overcome for "green marketing" programs to be more successful.

Inferior quality
High cost
Poor promotions
Resistance by the youth segment in the marketplace

The three major considerations in price setting includes, costs set as the "floor," ________, and customers' assessment of unique features establishing the price ceiling.

competitors' prices and the price of substitutes provide an orientation point
competitors' prices establishes a "target price" goal
the price of substitutes establishes a "target price"
none of the above

When Coca-Cola sold only one kind of Coke in a 6.5-ounce bottle, it was practicing what is called ________.

National populations vary in their age mix. At one extreme is _________ a country with a very young population and rapid population growth.


A brand manager is concerned that his organization's brand image and physical sales are slipping in the marketplace. The manager has decided to query consumers about the health of the brand and try to discover ways to leverage the brand's equity. Which of the following terms will most likely provide the structure and process for the manager's investigation?

A brand demographic matrix analysis.
A brand positioning study.
A brand audit.
An organizational audit.

A high market penetration index suggests that ________.

the price of the product or service is too high with respect to competition
it would be great time to expand distribution outlets
there will be increased costs of attracting the few remaining prospects
mistakes have been made in selecting the correct promotional alternatives

Which of the following terms matches to the phrase "it is a single business or collection of related businesses that can be planned separately from the rest of the company"?

Niche market unit.
Strategic business unit.
Diverse business unit.
Growth business unit.

One of the reasons new products fail is ________.

competitors who fight back hard
poor packaging
lack of marketing expertise
government regulations

If a buyer is loyal to two or three different brands of soap, this buyer's loyalty status can be described as being among the ________.

shifting loyals
split loyals
hard-core loyals

Which of the following is by far the most popular American leisure activity in that it is preferred by 35 percent of adults who participate in such activities?


Traditional brick-and-mortar retailers are responding to the growth of e-commerce by providing and emphasizing a ________ as a strong differentiator to stay at home shopping.

celebrities on premises
shopping experience
expert advice in selecting
wider selection of merchandise

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