Answer the following statements true (T) or false (F)
1. The average expected rate of return on an asset can be fully understood as the rate that compensates for risk.
2. The Security Market Line is a straight line that plots how the average expected rates of return on assets and portfolios in an economy vary with their respective levels of nondiversifiable risk as measured by beta.
3. When the Securities Market Line shifts up, the average expected rate of return on investment assets with given risk levels is increasing.
4. The decision of the Federal Reserve to reduce the short-term interest rate will shift the Security Market Line upward.
1. FALSE
2. TRUE
3. TRUE
4. FALSE
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How might a U.S. federal budget surplus affect the balance of trade? (Assume exchange rates are stated in terms of foreign currency per U.S. dollar.)
A) A federal budget surplus raises interest rates, which raises exchange rates, and increases the balance of trade. B) A federal budget surplus reduces interest rates, which raises exchange rates, and reduces the balance of trade. C) A federal budget surplus raises interest rates, which raises exchange rates, and reduces the balance of trade. D) A federal budget surplus reduces interest rates, which reduces exchange rates and increases the balance of trade.
Which of the following statements is true about information transfer within an organization?
a. More information is always better. b. People at higher levels cannot add to the quality of a decision when an employee lower in the order has all the information and is able to take the decision on his/her own. c. Decision relating to a particular department in an organization usually depends only on the information provided from that department. d. Optimal amount of information removes the risk of errors in decision-making.