If the Fed purchases U.S. government securities in the open market, all of the following would occur EXCEPT
A) an expansion of the money supply.
B) an increase in investment.
C) a fall in bond prices.
D) an increase in real Gross Domestic Product (GDP).
C
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A stock market boom which causes stock prices to rise should cause
A) a decrease in consumption spending. B) a decrease in wealth. C) an increase in consumption spending. D) a decrease in net export spending.
If the rate of return on the stock market is rm and the rate of return on a risk-free asset is rf, then
A) rm - rf measures the risk, all of it nondiversifiable, one has to accept in the stock market. B) rm - rf measures the risk, all of it diversifiable, one has to accept in the stock market. C) rm + rf measures the risk, all of it nondiversifiable, one has to accept in the stock market. D) rm + rf measures the risk, all of it diversifiable, one has to accept in the stock market. E) rm rf measures the stock market's total risk.