Assume that yields on bonds (rate of return) begin to fall while the stock market is booming, what should we see happen to the demand and price of stocks and why?
What can we say about the opportunity cost of holding on to bonds in this situation?
Lower bond yields will push many investors into stocks where they are seeking a higher rate of return. This should increase the demand for stocks and push up asset prices as well. The opportunity cost of holding on to bonds is high compared to owning stocks.
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In the graph for the consumption function, the 45-degree line
A) contains only a consumption component. B) represents both planned consumption and planned investment. C) shows various combinations where planned consumption equals real disposable income. D) reflects a decreasing APC as real disposable income rises.
Purchasing insurance removes risk
a. true b. false
When governments specify the maximum amount of a good that may be imported in a given period of time, they are establishing a
A) tariff. B) quota. C) dynamic tariff. D) tax. E) dumping limit.
Every society faces economic trade-offs. This means
A) not everyone can have enough goods to survive. B) some people live better than others do. C) society's output cannot be made available to all. D) producing more of one good means less of another good can be produced.