There is a specific relationship between the price of a bond and its yield. Which of the following describes that relationship?
a. If the price falls, the yield stays the same, but if the price rises, the yield rises.
b. As the price falls, the yield falls.
c. If the price rises, the yield stays the same, but if the price falls, the yield falls.
d. As the price rises, the yield rises.
e. As the price rises, the yield falls.
E
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Price cap regulation is regulation that
A) is a marginal cost pricing rule. B) is an average cost pricing rule. C) imposes a price ceiling on the regulated firm. D) has the same incentive effects as does rate of return regulation. E) is the same as allowing the firm to operate as if it was totally unregulated.
In the circular flow, investment refers to spending on
a. government bonds. b. certificates of deposit. c. capital goods. d. consumer goods.
Under the rational expectations hypothesis, which of the following is the most likely effect of a shift to a more expansionary monetary policy?
a. In the short run, the real rate of output will be unaffected, but in the long run, it will increase. b. In the short run, the real rate of output will increase, but in the long run, it will be unchanged. c. There will be a permanent increase in the real rate of output, but the inflation rate will also be a little higher. d. In the short run, the impact on the real rate of output is uncertain; in the long run, it will remain unchanged.
Relative performance evaluation reduces the labor cost borne by the firm by:
A. using the employee's output for setting the compensation. B. focusing on the near term while setting incentive pay. C. ratcheting up each year's performance targets. D. filtering out common shocks from employee incentive pay.