What possibilities exist to explain the claim made by many professional portfolio managers that they can exceed the average stock market return year after year?
What will be an ideal response?
As the chapter points out there are four possibilities; 1) the managers have private or insider information, which is illegal; 2) They are lucky; 3) They are taking on more risk which will provide a higher return in some years but can also lead to lower than average returns for other years; and 4) markets are not efficient.
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Assume that a fixed exchange rate is overvalued. Describe the situation of a speculative crisis against this currency. What can the central bank do to defend the currency? Why might the alternative of devaluation be preferable?
What will be an ideal response?
What are net exports using the information shown? In billions of dollarsConsumption5,100Investment1,100Transfer payments1,050Government Purchases1,400Exports850Imports950Net foreign factor income20
A. 850 B. ?100 C. 950 D. 100
Suppose the goal of a union is to maximize the total income of all workers it represents. In this case, it will probably aim for a wage at which the elasticity of demand for workers is
A. 0 B. infinite. C. 1 D. ranging from 2 to 5.
Monetarism is a school of thought put forth by Milton Friedman. He argued that the economy would ordinarily
A) be below potential GDP. B) be at potential GDP. C) be unstable. D) be above potential GDP.