Stock market analysts often argue that lower interest rates are good for the stock market. Does this argument make sense?
a. No; lower interest rates will tend to slow down the economy, and this will be bad for the stock market.
b. Yes; the lower rates of interest will increase the value of future income (and capital gains), and stock prices will rise to reflect this factor.
c. No; the lower rates of interest will reduce the value of future income (and capital gains), and this will cause stock prices to fall.
d. Yes; the lower interest rates will cause inflation, and inflation is generally good for the stock market.
B
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In the figure above, the shift in the aggregate demand curve from AD1 to AD3 could be the result of
A) a decrease in the real interest rate. B) a decrease in the buying power of money. C) an increased expectation of a recession that lowers the expected rate of profit from investment. D) a decrease in the foreign exchange rate. E) an increase in the price level.
What characteristic defines something as money?
A) assets declared by the government to be of value B) a medium of exchange widely accepted in an economy C) notes you can deposit in a savings account D) an asset that earns interest
An incentive conflict is when
a. The agent and the principal have identical incentives b. The agent has different incentives than does the principal c. The agent and the principal neither have any incentives to work hard d. None of the above
A firm in a monopolistically competitive market faces a
a. downward-sloping demand curve because the firm's product is different from those offered by other firms. b. downward-sloping demand curve because there are only a few firms in the market. c. horizontal demand curve because there are many firms in the market. d. horizontal demand curve because firms can enter the market without restriction.