The Greater the Magnitude of the Absolute Value of the Income

question 237

Multiple Choice

The greater the magnitude of the absolute value of the income elasticity of demand for a good, the more the

• A) demand for that good changes when income changes.
• B) total revenue for firms producing that good changes when income changes.
• C) price of the good changes when income changes.
• D) All of the above answers are correct.

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Definitions:

Cyclical Stock

Shares of companies whose earnings and stock price are heavily influenced by the ups and downs of the economy at large.

Countercyclical Stock

A type of stock whose performance is inversely related to the overall state of the economy; it tends to perform well during economic downturns.

Expected Return

Expected Return is the anticipated amount of profit or loss an investment is likely to generate, accounting for both the risk of the investment and the time value of money.

Expected Rate Of Return

An estimate of the profit or loss of an investment over a given period of time, expressed as a percentage.