Define the relationship between the average expected rate of return, if, and the risk premium.
What will be an ideal response?
The average expected rate of return is equal to if plus the risk premium. This occurs because investors must be compensated for their time preference of investing (or if) and the risk they take on in a particular investment (the risk premium). Together, these two factors produce the expected rate of return on an investment.
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What is the nature of the elasticity of the demand curve faced by perfectly competitive firm?
a. Perfectly inelastic b. Perfectly elastic c. Unit elastic d. Highly elastic
When a tax is placed on a product, the price paid by buyers
a. rises, and the price received by sellers rises. b. rises, and the price received by sellers falls. c. falls, and the price received by sellers rises. d. falls, and the price received by sellers falls.
In which case can we be sure aggregate demand shifts left overall?
a. people want to save more for retirement and the Fed increases the money supply. b. people want to save more for retirement and the Fed decreases the money supply. c. people want to save less for retirement and the Fed increases the money supply. d. people want to save less for retirement and the Fed decreases the money supply.
Exhibit 2-4 Production possibilities curve data A B C D E Capital goods 0 10 20 30 40 Consumer goods200 180 140 80 0 In Exhibit 2-4, if the economy chooses production possibility D rather than production possibility B, it can expect
A. less growth in the future because it will use up its consumer goods. B. more growth in the future because of the accumulation of capital. C. the same amount of growth in the future but with a lower standard of living. D. the same amount of growth in the future but with a higher standard of living.