Suppose an individual has state-independent tastes and invests in risky stocks rather than safe bonds. We can infer that he must be risk loving.
Answer the following statement true (T) or false (F)
False
Rationale: Not if the rate of return on stocks is higher than on bonds.
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The substitution effect from a fall in the price of a gallon of gasoline is shown in the above figure by the movement from
A) point A to point C. B) point A to point B. C) point B to point C. D) point A to point B and then to point C.
If the expected path of one-year interest rates over the next five years is 4 percent, 5 percent, 7 percent, 8 percent, and 6 percent, then the expectations theory predicts that today's interest rate on the five-year bond is
A) 4 percent. B) 5 percent. C) 6 percent. D) 7 percent.
John is currently spending all of his income. For the last unit of Good X consumed John gets 20 utils and for the last unit of Good Y consumed he gets 10 utils. The price of Good X is $10. The price of Good Y is $1. If John wants to maximize his utility
he should A) continue to purchase the same amount of Good X and Good Y. B) increase the consumption of Good X and decrease the consumption of Good Y. C) decrease the consumption of Good X and increase the consumption of Good Y. D) decrease the consumption of Good X and decrease the consumption of Good Y.
Juan is currently spending all of his income. For the last unit of Good X consumed Juan gets 20 utils and for the last unit of Good Y consumed he gets 10 utils. The price of Good X is $10. The price of Good Y is $1. If Juan wants to maximize his utility he should
A. continue to purchase the same amount of Good X and Good Y. B. increase the consumption of Good X and decrease the consumption of Good Y. C. decrease the consumption of Good X and increase the consumption of Good Y. D. decrease the consumption of Good X and decrease the consumption of Good Y.