In a Market Economy, the Decision Regarding Allocation of Resources

question 34

Multiple Choice

In a market economy, the decision regarding allocation of resources is made by

• A)automatic forces of supply and demand.
• B)authorities in Washington, D.C.
• C)planners in state capitals.
• D)committees from a variety of economic interest groups.
• E)All of the above are correct.

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Definitions:

Expected Rate

The rate of return that an investor anticipates earning on an investment without taking into account inflation or other factors that could affect the actual yield.

Liquidity Spreads

The difference in yield or cost between liquid (easily convertible to cash) assets and illiquid assets, often indicative of the liquidity premium required by investors.

Security A

A generic term used to represent a particular stock or financial instrument in theoretical examples.

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates higher volatility, and less than 1 indicates lower volatility.