ECON 2035 Study Guide - Midterm Guide: Equity Premium Puzzle, Great Moderation, Government Spending
Document Summary
However, we know there are different types of bonds short-term bonds and long-term bonds and government bonds and corporate bonds. Explain your answer: the long term government bond, according to the risk structure the l-t coporate. Bond have the less risk so it rether stable than all other types of bond: we said that the equity premium was lower from the mid-1980s to mid-2007 during the great moderation than in the 1960s-mid-1980s. Why: our price of stock is relate to the rate of return of the stock so if the expectation of the stock increase, suppose the stock price increase too. I will be consider that is a good news and favorable to the market, in the rule of efficient market (stock price will response to announcements only when the. Import: rise: when a country"s currency appreciates, its goods abroad become more expensive and foreign goods in that country become cheaper.
