What is a risk premium?
What will be an ideal response?
The maximum price a risk-averse person will pay to avoid taking a risk.
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According to the liquidity premium theory, the yield curve normally has a positive slope because
A) short-term interest rates are expected to rise. B) term premiums rise as the time to maturity increases. C) risk premiums rise over time. D) long-term bonds are more liquid than short-term bonds.
In the simple circular-flow diagram, with households and firms, GDP can be computed a. as the income received by households, in the form of wages, rent and profit. b. as the income received by households in the form of wages
c. as the payments made by firms for labor. d. as the profits received by households.
In a two-country world, many economists argue that an increase in the real interest rate in the domestic economy (relative to the real interest rate in the foreign economy)
A) tends to decrease domestic Real GDP. B) tends to increase domestic Real GDP. C) tends to have no impact on domestic Real GDP. D) has an indeterminable impact on domestic Real GDP given the above information.
Suppose the first hour of study today will allow you to answer 10 correct questions on tomorrow's exam. After the first hour, the marginal benefit of each additional hour of study is reduced by 2 (meaning if you study for 2 hours today your total number of correct response tomorrow will be 18 and if you study 3 hours it will be 24 and so on). If the cost of studying each additional hour is zero, how many hours should you study?
a. 18 b. 10 c. 6 d. 0 e. none of the above