Explain risk and liquidity of assets
What will be an ideal response?
Risk is the variability an asset contributes to a savers' wealth. An asset's real return can be unpredictable and savers dislike this uncertainty if the return fluctuates widely. Liquidity refers to the ease with which an asset can be sold or exchanged for goods. Cash is the most liquid of assets because it is always acceptable at face value as payment for goods or other assets. Thus, savers consider an asset's liquidity and its expected return and risk in deciding how much of it to hold.
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The Austrian view of the business cycle stresses that
a. expansionary monetary policy will stimulate aggregate demand and thereby promote lengthy economic expansions. b. the velocity of money is constant and therefore an increase in the quantity of money will lead only to a proportional increase in the general level of prices. c. expansionary monetary policy will lead to higher interest rates that will retard investment and throw the economy into a recession. d. the interest rate is one of the most important prices and manipulation of the interest rate by monetary policy-makers is a major source of economic instability.
If Europe experienced an inflation rate greater than that experienced in the United States, ceteris paribus, then ______.
a. European goods would become relatively more expensive to U.S. consumers b. Europeans would decrease the quantity of U.S. goods demanded c. U.S. goods would become relatively more expensive to European consumers d. U.S. residents would increase the quantity of European goods demanded
Refer to Figure 15-15. What is the economically efficient output level and what is the price at that level?
A) Q2, P2 B) Q2, P3 C) Q3, P2 D) Q4, P1
If the top personal tax rate is higher than the top corporate rate, high income taxpayers have an incentive to _____
a. incorporate b. save c. engage in tax evasion d. purchase stock