The risk-free rate is usually approximated by interest rates on U.S. government debt, because the US government:
A. backs all loans secured with that rate.
B. sets all policy concerning interest rates.
C. is considered extremely unlikely to default.
D. will never default on a loan that it makes.
Answer: C
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Answer the following statement(s) true (T) or false (F)
1. A Pigouvian tax is a charge on a good whose production generates a negative externality, such that the charge isequal to the MEC at the competitive output level.
2. In the single-polluter case, a firm faced with an emission charge for pollution implemented as a marginal tax (MT) will abate as long as MAC
The idea that saving equals investment in the Solow model means that a steady state can be reached only when
A) s = k. B) s = n + d. C) sf(k) = (s + d)k. D) sf(k) = (n + d)k.
The flaw of the Classical model of the business cycle is that it
A) assumes away output fluctuations. B) assumes complete wage rigidity. C) assumes unrealistic fooling of workers. D) requires procyclical wage movements and continuous labor market equilibrium.
The two basic reasons why economists often appear to give conflicting advice to policymakers are differences in
a. opinions and education. b. opinions and values. c. scientific judgments and education. d. scientific judgments and values.