Questions from General Economics

Q: If an investment has 35 percent more nondiversifiable risk than the market

If an investment has 35 percent more nondiversifiable risk than the market portfolio, its beta will be: a. 35. b. 1.35. c. 0.35.

Q: The interest rate on short-term U.S. government

The interest rate on short-term U.S. government bonds is 4 percent. The risk premium for any asset with a beta = 1.0 is 6 percent. What is the average expected rate of return on the market portfolio?...

Q: Suppose that an SML indicates that assets with a beta = 1

Suppose that an SML indicates that assets with a beta = 1.15 should have an average expected rate of return of 12 percent per year. If a particular stock with a beta = 1.15 currently has an average ex...

Q: If the Fed increases interest rates, the SML will shift _________

If the Fed increases interest rates, the SML will shift _________ and asset prices will ________. a. Down; rise. b. Down; fall. c. Up; rise. d. Up; fall.

Q: Why will a reduction in the real interest rate increase investment spending

Why will a reduction in the real interest rate increase investment spending, other things equal?

Q: In what direction will each of the following occurrences shift the investment

In what direction will each of the following occurrences shift the investment demand curve, other things equal? a. An increase in unused production capacity occurs. b. Business taxes decline. c. The...

Q: In long-run equilibrium, P = minimum ATC = MC

In long-run equilibrium, P = minimum ATC = MC. Of what significance for economic efficiency is the equality of P and minimum ATC? The equality of P and MC? Distinguish between productive efficiency an...

Q: How is it possible for investment spending to increase even in a

How is it possible for investment spending to increase even in a period in which the real interest rate rises?

Q: Why is investment spending unstable?

Why is investment spending unstable?

Q: Is the relationship between changes in spending and changes in real GDP

Is the relationship between changes in spending and changes in real GDP in the multiplier effect a direct (positive) relationship or is it an inverse (negative) relationship? How does the size of the...