Assume that yields on bonds (rate of return) begin to fall while the stock market is booming, what should we see happen to the demand and price of stocks and why?
What can we say about the opportunity cost of holding on to bonds in this situation?
Lower bond yields will push many investors into stocks where they are seeking a higher rate of return. This should increase the demand for stocks and push up asset prices as well. The opportunity cost of holding on to bonds is high compared to owning stocks.
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What is the difference between real and nominal GDP, and why do economists make this distinction?
What will be an ideal response?
Starting from an autarky (no-trade) situation with Heckscher-Ohlin model, if Country H is relatively labor abundant, then once trade begins
A) wages should rise and rents should fall in H. B) wages and rents should rise in H. C) wages and rents should fall in H. D) wages should fall and rents should rise in H. E) rent will be unchanged but wages will rise in H.