If stocks are riskier than bonds, why would a rational investor ever buy stocks?
What will be an ideal response?
Although stocks are riskier than bonds, the probable rate of return is also higher for stocks. For a higher return, some investors are willing to accept the higher risk. In addition, with diversification, it is possible to reduce the risk of the portfolio of investments. Although the risk of each individual stock may be high, the risk of the portfolio will generally be much lower. The rational investor will select a portfolio that gives acceptable risk for the expected return.
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According to monetarists, such as Milton Friedman ________
A) the central bank should have discretionary authority to respond to economic problems that develop over the course of the business cycle B) the Taylor rule should effectively address the problem of inflation C) an increase in government spending has substantially the same effects as an unanticipated increase in the money supply on domestic interest rates D) the money supply should grow at a constant rate regardless of the state of the economy
Inventory is the
a. net change in inventories of final goods awaiting sale. b. net change in inventories of materials used in the production process. c. included in investment when calculating GDP. d. Both a and b. e. All of the above.
Which statement best describes the relationship between steamboats, keelboats and flatboats on the Mississippi River in the antebellum period?
a. Steamboats were substitutes for both keelboats and flatboats. b. Steamboats were complements for both keelboats and flatboats. c. Steamboats were substitutes for keelboats and complements for flatboats. d. Steamboats were substitutes for flatboats and complements for keelboats.
If a rapidly growing population is one of the major problems facing LDCs, explain why a decrease in mortality rates is desirable, from an economic standpoint