Risk aversion helps to explain various things we observe in the economy, including
a. adherence to the old adage, "Don't put all your eggs in one basket.".
b. insurance.
c. the risk-return trade-off.
d. All of the above are correct.
d
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"Inflation acts as a tax because the government gains purchasing power." Is the previous statement correct or incorrect?
What will be an ideal response?
As part of the "wealth channel of monetary policy," a higher money supply __________ interest rates and thus __________ bond prices
A) raises; raises B) raises; lowers C) lowers; raises D) lowers; lowers
In a competitive market with identical firms,
a. an increase in demand in the short run will result in a new price above the minimum of average total cost, allowing firms to earn a positive economic profit in both the short run and the long run. b. firms cannot earn positive economic profit in either the short run or long run. c. firms can earn positive economic profit in the long run if the long-run market supply curve is upward sloping. d. free entry and exit into the market requires that firms earn zero economic profit in the long run even though they may be able to earn positive economic profit in the short run.
Suppose the banks in the Federal Reserve System have $1 billion in transactions accounts and the reserve requirement is 0.20. Ceteris paribus, if the reserve requirement is increased to 0.25, then excess reserves will:
A. Increase by $250 million. B. Increase by $50 million. C. Decrease by $250 million. D. Decrease by $50 million.