Economics MCQs

Page No. 331

An increase in the prevailing interest rate ?


a increases the present value of future returns from investment and increases investment


bdecreases the present value of future return from investment and decreases investment


c decreases the present value of future returns from investment and increase investment


d increases the present value of future returns from investment and decreases investment



If a depositor puts Rs100 in a bank amount that earns 4 percent interest compounded annually, how much will be in the account after five years ?


aRs400.00


bRs 104.00


cRs 121.67


d Rs 123.98


View Answer Rs 121.67

It is difficult for an actively managed investment fund to outperform an index fund because ?


a stock markets tend to be inefficient


ball of these answers


cindex funds are able to buy undervalued stocks


d actively managed funds trade more often and charge fees for their alleged expertise



Share prices will follow a random walk if ?


ashares are overvalued


bpeople behave irrationally when choosing shares


cmarkets reflect all available information in a rational way


dshares are undervalued



Which of the following should cause the price of a share of stock to rise ?


a None of these answers


bAn increase in expected dividends


cA reduction in aggregate risk


dAll of these answers


View Answer All of these answers

If the efficient markets hypothesis is true, then ?


a shares tend to be overvalued


bthe stock market is informationally efficient so share prices should follow a random walk


c All of these answers


d fundamental analysis is a valuable tool for increasing one’s returns from investing in shares



Compared to a portfolio composed entirely of shares a portfolio that is 50 percent government bonds and 50 percent shares will have a ?


a lower return and a lower level or risk


b lower return and a higher level of risk


chigher return and a lower level or risk


dhigher return and a higher level of risk



Idiosyncratic risk is the ?


auncertainty associated with the entire economy


b uncertainty associated with specific companies


crisk associated with adverse selection


drisk associated with moral hazard



Which of the following does not help reduce the risk that people face ?


aincreasing the rate of return within their portfolio


bdiversifying their portfolio


cAll of these answers help reduce risk


dbuying insurance



If two countries start with the same real GDP/person and one country grows at 2 percent while the other grows at 4 percent ?


aone country will always have 2 percent more real GDP/person than the other


b the standard of living in the country growing at 4 percent will start to accelerate away from the slower growing country due to compound growth


cthe standard of living in the two countries will converge


d Next year the country growing at 4 percent will have twice the GDP/person as the country growing at 2 percent



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