From the viewpoint of the individual investor, are stocks or bonds riskier? Explain
Stocks are riskier in the sense that there is no guaranteed return. Individuals buy stock if they believe returns will be sufficiently high to justify the risk. Bonds give a known payment, plus return of principal (unless the company goes bankrupt). The risk to the bondholder is that inflation may eat away at the principal, and rising interest rates may adversely affect the bond's value in secondary markets.
You might also like to view...
For most of World War II, the United States economy temporarily operated ____________ the production possibilities frontier.
Fill in the blank(s) with the appropriate word(s).
Which of the following would shift the long-run Phillips curve to the right?
a. expansionary fiscal policy b. an increase in the inflation rate c. increases in unemployment compensation d. None of the above is correct.
According to the Ricardian equivalence theorem, a tax cut that increases the government budget deficit will have
A. no effect on aggregate demand because people realize that there will be a future tax liability so that there is no increase in consumption expenditures. B. a positive effect on aggregate demand because people look at changes in taxes or government spending in the present. C. no effect on aggregate demand because people only look at changes in taxes or government spending in the present. D. an effect on aggregate demand. The magnitude the effect will have depends upon whether the increase is caused by a reduction in taxes or an increase in government spending.
If the economy is on the steep part of the aggregate supply curve, the output multiplier is close to zero.
Answer the following statement true (T) or false (F)