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What about an investor who puts all of his money into only a single risky stock? Can he properly ignore diversifiable risk?
What determines its vertical intercept? What determines its slope? And what will happen to an asset's price if it initially plots onto a point above the SML?
Which will have a larger increase in average expected rates of return, investments with high betas or investments with low betas?
Why is it so hard for actively managed funds to generate higher rates of return than passively managed index funds having similar levels of risk?
Do these results make sense given what you have learned? Should you be impressed that funds with risky portfolios generate high returns?
Which of the following statements are true? Which are false? Explain why the false statements are untrue.
What is an efficiency wage? How might payment of an above-market wage reduce shirking by employees and reduce worker turnover?
What concept does this example illustrate? How does this idea relate to macroeconomic instability?
What does the aggregate supply curve look like? In this case, if AD decreases, what will happen to equilibrium output and the price level?
Compare and contrast the Taylor rule for monetary policy with the older, simpler monetary rule advocated by Milton Friedman.
Explain the idea of a political business cycle. How might expectations of a near-term policy reversal weaken fiscal policy based on changes in tax rates?
How do economists distinguish between the absolute and relative sizes of the public debt? Why is the distinction important?
What is the index of leading economic indicators, and how does it relate to discretionary fiscal policy?
Which specific components are up, and which are down? What has been the trend of the composite index over the past 3 months?
What are the major categories of firms that make up the U.S. financial services industry?
Households deposit $5000 in currency into the bank that is added to reserves. What level of excess reserves does the bank now have?
Why must a balance sheet always balance? What are the major assets and claims on a commercial bank's balance sheet?
A halfhour later Smith obtains a loan for $750 at this bank. By how much and in what direction has the money supply changed? Explain.
How does Say's law relate to the view held by classical economists that the economy generally will operate at a position on its production possibilities curve?
. What are the economic strengths and weaknesses in both? Are retailers reporting that recent sales have met their expectations?
What is the central economic idea humorously illustrated in Art Buchwald's piece, Squaring the Economic Circle?
What relationship does the MPC bear to the size of the multiplier? The MPS? What will the multiplier be when the MPS is 0, .4, .6, and 1?
The machine is expected to contribute $550 to the year's net revenue. What is the expected rate of return?
What are the basic determinants of investment? Explain the relationship between the real interest rate and the level of investment.
What are the four phases of the business cycle? How do seasonal variations and long-run trends complicate measurement of the business cycle?