When the Federal Reserve raises the federal funds rate, the long-term real interest rate ____ and investment ____.

• A.rises; increases
• B.falls; decreases
• C.rises; decreases

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A company can determine if its ______ objective has been met by evaluating its ability to earn a satisfactory net income.

• A.profitability.
• B.cash flow adequacy.
• C.liquidity.

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The following data pertains to the McGuire Company:
Net income: $15,000. 5,000 shares of common stock issued on January 1st. 10 percent stock dividend issued on June 1st. 1000 shares of common stock were repurchased on July 1st. 1000 shares of 10 percent, par $100 preferred stock each convertible into 8 shares of common were outstanding the whole year.
What is the company's basic earnings per share (EPS)?

• A.1.2
• B.1.0
• C.2.5

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Refer to the graph below. Assuming a consumer has $5 to spend, if a soda costs $0.50 and a chocolate bar costs $0.50, the consumer would optimally choose to consume:

• A.at point A
• B.at point B
• C.10 cans of soda and 0 chocolate bars.

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If the real growth rate of the economy is 3% and the money supply is increasing at 4%, given that the velocity of money is constant

• A.the rate of inflation will equal 1%.
• B.prices will decline at the rate of 1%.
• C.nominal interest rates will decline by 1%.

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