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Based on the scenario analysis on stocks and bonds, we know the following:
- Treasury bonds will provide a higher return in a recession than in a boom.
- The expected return of Bonds is 9.8% and that of stocks is 11.6%.
- The standard deviation of Bonds is 9.24% and that of stock is 11.76%.
<h3>What does the scenario analysis on Bonds and Stocks show?</h3>
In a recession, Bond returns will be 15%. This is much higher than Bond returns in a boom of only 5%.
The expected return on bonds will be:
= ∑(Probability of Scenario x Returns in scenario)
= (0.30 x 15%) + (0.60 x 8%) + (0.10 x 5%)
= 9.8%
The expected return on stocks will be:
= (0.30 x -6%) + (0.60 x 18%) + (0.10 x 26%)
= 11.6%
Using a spreadsheet, you can input the expected returns of the stocks and the bonds to find the standard deviation to be 9.24% and 11.76%, respectively.
Find out more on stock expected returns at brainly.com/question/18724022.
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Answer:
c. believe in the use of fiscal policy to stabilize the economy.
Explanation:
According to Keynesian theory, the sum of some micro-economic behaviors of all individuals and businesses results in inefficiency and the economy operates at a level below its potential output and growth. When total demand for products is insufficient, the economy enters a crisis and unnecessary unemployment arises due to defensive behavior of the producers. In such cases, the government may pursue policies to increase aggregate demand, and as a result may accelerate economic activities and reduce unemployment. Most Keynesian propose policies to stabilize the business cycle. For example, when the unemployment level is too high, the state can pursue a growth-oriented monetary policy. , one of the most famous of his critiques, Keynes argues and did not agree with "The Laissez-faire" that he opined the doctrines of laissez-faire are dependent on some extent on a case-by-case basis.
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