Suppose that an increased risk of mortgage defaults lowers the expected profitability of banks. Then we would expect to see
a. the demand for bank stocks rise which would raise the prices of bank stocks.
b. the demand for bank stocks rise which would reduce the prices of bank stocks.
c. the demand for bank stocks fall which would raise the prices of bank stocks.
d. the demand for bank stocks fall which would reduce the prices of bank stocks.
d
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Compare the effect on the price level and real GDP of a decrease in tax rates assuming a supply-side effect versus no supply-side effect
Compared to no supply-side effect, including a supply-side effect for the decrease in tax rates will cause the price level to increase ________ and real GDP to increase ________. A) more; less B) less; less C) more; more D) less; more
If expectations of the future inflation rate are formed solely on the basis of a weighted average of past inflation rates, then economists would say that expectation formation is
A) irrational. B) rational. C) adaptive. D) reasonable.
Refer to the above table. What is the absolute price elasticity of demand when price changes from $6.00 to $6.50?
A) 1.60 B) 1.00 C) 0.65 D) 0.60
The term “dirty float” is used to describe a
A. black market in foreign currencies. B. floating currency that is “managed” by central bank authorities. C. nation that switches from free to fixed exchange rates. D. currency system used only in inflationary periods.