Question #9
Reading: Reading 39 Economics and Investment Markets
PDF File: Reading 39 Economics and Investment Markets.pdf
Page: 3
Status: Unattempted
Correct Answer: B
Question
The real rate of return is most likely higher:
Answer Choices:
A. Lower the utility investors attach to future consumption relative to current consumption
B. Higher the expectations of lower income in the future
C. Higher the utility investors attach to future consumption relative to current consumption
Explanation
Real rate of return is higher, higher the utility of current consumption relative to future
consumption. If investors expect lower incomes in the future, the utility of future
consumption relative to current consumption will be higher and real rate will be lower.