Suppose Consumption Is $60,000 When Income Is $90,000 and the MPS

question 143

Multiple Choice

Suppose consumption is $60,000 when income is $90,000 and the MPS equals 0.25. When income increases to $100,000, consumption is

• A) $90,250.
• B) $85,000.
• C) $70,000.
• D) $67,500.

Understand the process for evaluating mispriced securities through their perpetual cash flow in comparison to market and risk-free rates.

Comprehend how beta influences security pricing and portfolio beta calculation, including adjustments based on personal beliefs about true beta.

Learn about the mutual-fund theorem and its implications for investment strategies.

Apply the concept of portfolio management and alpha generation through strategic capital allocation and stock selection.

---

Definitions:

Generation X

The demographic cohort following the Baby Boomers, typically defined as those born from the early-to-mid 1960s to the early 1980s.

Asian Americans

A diverse group of individuals in the United States with origins from countries in Asia, including China, India, Japan, Korea, the Philippines, and others.

Hispanic

Refers to individuals, cultures, or countries related to Spain, or to Spanish-speaking countries, particularly in Latin America.

Eastern Europeans

People from the eastern part of Europe, which includes countries such as Poland, Ukraine, Russia, and Romania, among others.