An investor is trying to decide whether to put his funds into stocks or bonds. He expects rising interest rates over the next year and higher inflation. Your advice?
Bond prices fall as interest rates rise. For yield to rise to the higher interest rate, bond prices offered in secondary markets must decrease. Furthermore, higher inflation will reduce the real value of the principal. So bonds are a poor investment. These factors are not as critical for stock prices. Although not discussed in the text, stocks may be a good hedge against inflation, since their nominal price may rise to maintain real price. Rising interest rates are generally not good for stock prices, but the link is not as strong as for bond prices.
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If the real interest rate is below the equilibrium real interest rate
A) lenders will be unable to find borrowers willing to borrow all of the available funds and the real interest rate will fall. B) borrowers will be unable to borrow all of the funds they want to borrow and the real interest rate will rise. C) lenders will be unable to find borrowers willing to borrow all of the available funds and the real interest rate will rise. D) borrowers will be unable to borrow all of the funds they want to borrow and the real interest rate will fall.
When a firm produces one unit, the variable cost is $3. When the firm produces two units, the variable cost is $6. What is the marginal cost associated with two units of production?
A) $2 B) $0.5 C) $6 D) $3
In perfect competition, firms are price makers
a. True b. False Indicate whether the statement is true or false
Which of the following effects will not increase (i.e., shift to the right) the aggregate supply curve?
a. An increase in the average national price level. b. An appreciation of the domestic currency. c. An increase in the number of immigrants. d. All of these answers are correct. e. None of these answers are correct.