The expected rate of return from an investment is:
A. Only the rate that compensates for time preference
B. Only the rate that compensates for risk
C. The rate that compensates for time preference plus the rate that compensates for risk
D. The rate that compensates for time preference minus the rate that compensates for risk
C. The rate that compensates for time preference plus the rate that compensates for risk
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Suppose that at current consumption levels an individual's marginal utility of consuming an extra hot dog is 10 whereas the marginal utility of consuming an extra soft drink is 2 . Then the MRS (of soft drinks for hot dogs)—that is, the number of hot dogs the individual is willing to give up to get one more soft drink—is:
a. 5. b. 2. c. 1/2. d. 1/5.
People learn to hold a specific quantity of money for the groceries, theater tickets, gasoline, clothes, film, and other items they habitually purchase. This behavior is representative of the:
a. precautionary demand. b. speculative demand. c. transactions demand. d. volatility demand. e. liquidity demand.