The process by which investors seek to profit by simultaneously selling an asset with a lower rate of return and buying an otherwise identical asset with a higher rate of return is known as:
A. hedging the market.
B. passive fund management.
C. arbitrage.
D. portfolio balancing.
C. arbitrage.
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Suppose Canada has a population of 30 million people and a labor force participation rate of 2/3. Furthermore, suppose the natural rate of unemployment in Canada is 7%. If the current number of unemployed people is 1.4 million people, what can we conclude about Canada's economy?
A. The unemployment rate is above the natural rate of unemployment. B. The unemployment rate is below the natural rate of unemployment. C. There is cyclical unemployment present in the economy. D. There is no cyclical unemployment present in the economy.
Suppose Jack and Kate are at the town fair and are choosing which game to play. The first game has a bag with four marbles in it-1 red marble and 3 blue ones. The player draws one marble from the bag; if it is red, they win $20 and if it is blue, they win $1. The second game has a bag with 10 marbles in it-1 red, 4 blue, and 5 green. The player draws one marble from the bag; if it is red, they win $20; if it is blue, they win $5; and if it is green, they win $1. Both games cost $5 to play. If Jack only cares about expected value, and not risk, he should decide to play a game if:
A. the expected value of the payoff is higher than the price to play the game. B. the expected value of the payoff is lower than the price to play the game. C. the expected value of the payoff is higher than the expected value of the payoff in the other game. D. the expected value of the payoff is double the price to play the game.
To close a $100 recessionary gap, with MPC = 0.5, the government can
a. increase its spending by $100 b. decrease its spending by $100 c. increase its spending by $200 d. increase its spending by $200 e. decrease its spending by $50
If the going rate of interest were 8 percent and the expected profit rate were 14 percent, then the opportunity cost of a firm carrying out a $100,000 project for one year with its own funds would be
A. 0.
B. $6,000.
C. $8,000.
D. $14,000.