The amount by which the expected return on a risky asset exceeds the return on an otherwise comparable safe asset is known as the
A. term spread.
B. CDS spread.
C. VIX.
D. risk premium.
Answer: D
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If the marginal revenue from a quality improvement is ________ its marginal cost, it ________ profitable to produce a higher-quality product.
A) less than; is B) greater than; is C) exactly double; is not D) greater than; is not
If the government decreases the income tax rate, then:
A. GDP will decrease. B. aggregate demand will shift left. C. aggregate demand will shift right. D. aggregate supply curve with shift to the right.
In the market for insurance, the adverse selection problem arises because
a. fair odds are different for different people, and the insurance company cannot tell who is who. b. people tend to behave more recklessly when they are insured. c. some events simultaneously affect a large number of people. d. insurance companies must tilt the odds in their favor to cover their basic operating costs.
When a demand curve shifts to the right
A. demand has increased, so supply also shifts to the right, and the equilibrium price increases. B. demand has decreased, so equilibrium price decreases, and equilibrium quantity decreases. C. demand has increased, so equilibrium price increases, and equilibrium quantity increases. D. demand has decreased, so supply also shifts to the right, and the equilibrium price decreases.