Explain why the rate of return from investing in stocks is higher than from investing in bonds
What will be an ideal response?
Most people are risk averse. They only make investments if the rate of return on a risky investment exceeds the rate of return on a less risky investment by a risk premium. Stock are more risky because they have more non-diversifiable risks. Thus, stocks must include a risk premium in their return to attract investors.
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Labor force productivity has increased from $30 per hour to $32 per hour over the past year. This could result from
A) an increase in real GDP with no change in the aggregate hours or a decrease in aggregate hours with no change in real GDP. B) only an increase in real GDP. C) an increase in population. D) an increase in the labor force participation rate. E) only a decrease in aggregate hours.
Which of the following is not a characteristic of a prisoner's dilemma game?
A) Defecting is a dominant strategy for each player. B) Each player has two strategies: cooperate or defect. C) There is a single Nash equilibrium. D) The Nash equilibrium is the best outcome for each individual and for the grou