Questions from General Economics

Q: A change in the expected price level shifts a. the

A change in the expected price level shifts a. the aggregate-demand curve. b. the short-run aggregate-supply curve, but not the long-run aggregate-supply curve. c. the long-run aggregate-supply curve,...

Q: If the government wants to contract aggregate demand, it can ________

If the government wants to contract aggregate demand, it can ________ government purchases or ________ taxes. a. increase, increase b. increase, decrease c. decrease, increase d. decrease, decrease

Q: If the interest rate is 10 percent, then the present value

If the interest rate is 10 percent, then the present value of $100 to be paid in 2 years is a. $80. b. $83. c. $120. d. $121.

Q: The ability of insurance to spread risk is limited by a

The ability of insurance to spread risk is limited by a. risk aversion and moral hazard. b. risk aversion and adverse selection. c. moral hazard and adverse selection. d. risk aversion only.

Q: The benefit of diversification when constructing a portfolio is that it can

The benefit of diversification when constructing a portfolio is that it can eliminate a. speculative bubbles. b. risk aversion. c. firm-specific risk. d. market risk.

Q: According to the efficient markets hypothesis, a. changes in

According to the efficient markets hypothesis, a. changes in stock prices are impossible to predict from public information. b. excessive diversification can reduce an investor’s expected portfolio re...

Q: The interest rate is 7 percent. What is the present value

The interest rate is 7 percent. What is the present value of $150 to be received in 10 years?

Q: Describe three ways that a risk-averse person might reduce the

Describe three ways that a risk-averse person might reduce the risk she faces.

Q: Fortune magazine regularly publishes a list of the “most respected”

Fortune magazine regularly publishes a list of the “most respected” companies. According to the efficient markets hypothesis, if you restrict your stock portfolio to these companies, will you earn a b...

Q: What is adverse selection? Give an example of a market in

What is adverse selection? Give an example of a market in which adverse selection might be a problem.