Refer to the graph. An increase in the Security Market Line from SML 1 to SML 2 and an increase in the average expected rate of return of asset A from Y 1 to Y 2 would be explained by:
A. arbitrage only.
B. a restrictive monetary policy only.
C. both arbitrage and a restrictive monetary policy.
D. neither arbitrage nor a restrictive monetary policy.
C. both arbitrage and a restrictive monetary policy.
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The above figure shows the market for a particular good. If the market is controlled by a perfect-price-discriminating monopoly, the deadweight loss equals
A) C + E. B) A + B + C. C) C. D) zero.
When two goods are substitutes
A) the demands for both goods will be inelastic. B) cross price elasticity of demand will be 0. C) cross price elasticity of demand will be negative. D) cross price elasticity of demand will be positive.
One reason stagflation is difficult to recover from is because:
A. less output requires less inputs to be hired. B. prices tend to adjust more quickly downward than upward. C. wages are sticky downward. D. input prices increase with output prices.
The relationship in the economy between consumption and income is called _____
Fill in the blank(s) with the appropriate word(s).