Under a consumption-based theory of the pricing of risky assets, uncertain returns on such an asset should be discounted by a "stochastic discount factor" that takes into account:
a. the mean and standard deviation of the uncertain return
b. whether the uncertain return has a normal distribution.
c. both the nominal and real interest rates.
d. the rate of time preference and present and future marginal utility of wealth.
d
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Whenever a bank's actual reserves exceed its desired reserves, the bank
A) can lend out additional funds. B) needs to call in loans. C) will go out of business. D) must increase the amount of its required reserves by obtaining more cash.
With respect to water and diamonds, water
A) has a higher marginal utility than diamonds. B) has a lower marginal utility than diamonds. C) is cheaper than diamonds because it has a lower total utility. D) is cheaper than diamonds because it has a higher total utility.
Related to the Economics in Practice on page 3: According to the Economics in Practice, due to the opportunity cost differential, one would expect ________ children at school when the rains have been plentiful in rural India, and ________ children at school when rural India is suffering from a drought.
A. fewer; more B. no; all C. the same number of; the same number of D. more; fewer
In 2016, Ford Motor Company's sales were rising. These events were caused by
A) an economic recession. B) an economic expansion. C) an increase in advertising. D) improving quality of service.