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Cards In This Set
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Investment spending (for an economist and for the GDP accounts) refers to:
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Adding physical capital
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National savings in a closed economy is:
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- the sum of private savings plus the government budget balance- the total saving generated within the economy- GDP - C - G
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The government saves when
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Tax revenue is larger than government transfers plus government spending
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A business will want to borrow to undertake an investment project when the "internal rate of return" (irr) on that project is:
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Greater than the interest rate
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When a corporation borrows money from lenders in exchange for a fixed share of the firm's assets and potential profits, the corporation is:
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Issuing stocks
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Financial assets that carry more risk
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Usually have a higher rate of return
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A common strategy to reduce the potential of a large financial loss is:
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Diversification of financial assets, so that their risks of failure are unrelated
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Which of the following portfolios is the most diversified in terms of risk
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$100,000 worth of stock in ten different companies in five different industries
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The efficient markets hypothesis states:
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At any time stock prices are fairly valued reflecting all currently available information
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Between 2000 and 2006, there was a "housing bubble" in the US, a "bubble" is:
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An increase in real estate prices driven by unrealistic expectations about future prices
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