Distinguish between risk that can be reduced through diversification and risk that cannot be reduced through diversification
What will be an ideal response?
Risk that cannot be diversified away affects all investments equally. Examples would include war and natural disasters. Risk that can be reduced through diversification includes changes to the value of an investment that is not perfectly positively correlated with the values of other investments.
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"Because resources are scarce, the production of more capital goods means that fewer resources are available to produce consumption goods, so there is less current consumption." Do you agree or disagree? Explain
What will be an ideal response?
A decrease in supply and an increase in demand cause which of the following?
a. Equilibrium price change is indeterminate. b. Equilibrium quantity decreases. c. Equilibrium price falls. d. Equilibrium quantity rises. e. Equilibrium quantity change is indeterminate.