# Assume the expected long-run growth rate of the economy increased by 1% and the expected rate...

## Question:

Assume the expected long-run growth rate of the economy increased by 1% and the expected rate inflation increased by 4%.

What would happen to the required rates of return on government bonds and common stocks?

Show graphically how the effects of these changes would differ between these alternative investments.

## Required Rate of Return:

This question calls for familiarity with a required rate of return, which is the rate an investor demands in exchange for assuming the risks associated with a given investment. Higher risk investments necessitate higher rates of return.

## Answer and Explanation: 1

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View this answerIf the expected long-run growth rate of the economy increased by 1% and the expected rate of inflation increased by 4%, the required rates of return...

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Chapter 1 / Lesson 29Learn about the required rate of return. Understand what the required rate of return is, examine the required rate of return formulas, and learn how to calculate it.

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