Answer the following statements true (T) or false (F)
1. The average expected rate of return on an asset can be fully understood as the rate that compensates for risk.
2. The Security Market Line is a straight line that plots how the average expected rates of return on assets and portfolios in an economy vary with their respective levels of nondiversifiable risk as measured by beta.
3. When the Securities Market Line shifts up, the average expected rate of return on investment assets with given risk levels is increasing.
4. The decision of the Federal Reserve to reduce the short-term interest rate will shift the Security Market Line upward.
1. FALSE
2. TRUE
3. TRUE
4. FALSE
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As more people started building houses in your community, more street lights were installed in your locality making it safer and easier to drive through. This is an example of a(n) ________
A) pecuniary externality B) network externality C) moral hazard D) adverse selection
Your willingness to pay additional money for time-saving goods depends primarily on
a. the opportunity cost of your time b. your wealth and property c. your social status d. the number of people in your household e. the distance between your home and your workplace
The gross domestic product (GDP) of an economy for a particular year is likely to increase if _____
a. workers go on longer vacations during that year b. the length of an average work week decreases c. homeowners hire lawn care services rather than maintaining the lawns themselves d. people cook food at home instead of buying restaurant meals e. the sale of illegal drugs increases
Excess demand in an unregulated market will cause the price of a product to fall.
Answer the following statement true (T) or false (F)