Explain the concept of a risk premium. What purpose do risk premiums serve?
What will be an ideal response?
A risk premium is the difference in rates of return on risky (uncertain) and safe (certain) investments. No one will step forward to finance risky investments unless they are promised an above-average return.
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The price elasticity of supply is higher when
A) the number of producers in the market increases over time. B) the product in question is a complementary good. C) the number of buyers in the market increases. D) producers have less time to adjust to price changes.
The primary measure of a country's development is
What will be an ideal response?
Use the following list of modern macroeconomic theories in order to describe the following statement: Discretionary fiscal and monetary policies are effective tools of economic stabilization.
A. Keynesian economics B. Monetarism C. The theory of rational expectations D. New Classical Economics
A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?
A. Natural B. Structural C. Cyclical D. Frictional