QUESTION 6  HAS TWO PARTS (A， B) FOR A TOTAL OF 8 MINUTES.
　　Catherine Marco is also responsible for formulating economic commentary for Mouton Investments， Inc. After updating key economic indicators for her latest research report， Marco presents the following two statements to Mouton‘s Board of Directors：
　　1. “Forecasts of a near-term credit contraction with a decline in the money supply and a reduction in the aggregate liabilities of banks is likely to result in no expansion of bank loan activity and no increase in nominal disposable income.”
　　2. “When economic growth increases， industrial production is likely to expand at a faster rate than the domestic money supply.”
　　A. Judge whether each of Marco’s two statements is correct or incorrect. If incorrect， give one reason why the statement is incorrect.
　　Answer Question 13-A in the Template provided on page 85.
　　(4 minutes)
　　Marco anticipates a change in the domestic economy from stable inflation to rising inflation， and presents the following two recommendations to the Board：
　　1. “Retail consumption should decrease because rising inflation will drive prices higher. I expect equities in the retail sector to underperform the market， so we should recommend that our clients reduce their exposure to this sector.”
　　2. “Because of the changing inflationary environment， we should recommend that our clients reduce their current exposures to international equities relative to domestic equities.”
　　答案：B.
        解析：Evaluate whether each of Marco‘s two recommendations is appropriate or inappropriate，if the inflation rate increases. If inappropriate， justify with one reason why the recommendation is inappropriate. Answer Question 13-B in the Template provided on page 86.
　　(4 minutes)
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