Econ_252_Exam_2_-_PINK_-_Spring_2011

Econ_252_Exam_2_-_PINK_-_Spring_2011 - 1. M2 is _ liquid...

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1. M2 is _____ liquid than M1 because it includes _____ deposits. a) more; time b) more; demand c) less; demand * d) less; time 2. In order to reap most of the gains to diversification, lowering your portfolio risk to almost the level of residual market risk, you should include at least ______ stocks in your portfolio. a) 5 b) 10 * c) 20 d) 100 Consider the following employment data for the land of Economia: Category Number of Individuals (Millions) Employed 240 Unemployed 10 Not in the Labor Force 150 3. In the land of Economia, the unemployment rate is currently _____ percent. a) 2.5 * b) 4.0 c) 6.67 d) None of the above are correct. 4. In the land of Economia, the labor force participation rate is currently _____ percent. a) 60.0 * b) 62.5 c) 65.0 d) None of the above are correct. 5. Ceteris paribus, an increase in investment tax credits will _______ the level of interest rates and _____ investment in capital equipment by firms. * a) increase; increase c) decrease; increase b) increase; decrease d) decrease; decrease 6. A bond which promises to pay $10,000 to the bearer (purchaser) of the bond 10 years from today sells for $5,453.94 today. The annual interest yield or return offered by this bond equals ______ percent. a) 4.84 b) 5.26 * c) 6.25 d) 8.33 7. Advances in the field of genetics have allowed us to identify potential health risks by examining (testing) a person’s DNA. If we allow individuals to have their DNA tested, but do not allow insurance companies to see the results of such tests, we increase ________ problems for insurance companies. a) Risk Diversification. * b) Adverse selection. c) Moral Hazard. d) Negative externality. Exam 2 – PINK VERSION Page 1 of 5 Econ 252 – Spring 2011
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8. Bill would like to have $5,000 in his savings account 25 years from today. If the savings account pays interest of 2.5 percent per year, he should deposit ______ in his account today to reach his goal. * a) $2,696.95 b) $3,403.50 c) $3,991.25 d) $5,000.00 9. If financial markets are efficient, a) we cannot expect to earn higher returns unless we are willing to assume greater risk.
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Econ_252_Exam_2_-_PINK_-_Spring_2011 - 1. M2 is _ liquid...

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