Which of the Following Is TRUE

question 23

Multiple Choice

Which of the following is TRUE?

• A)core inflation excludes price changes for food and energy
• B)core inflation only includes price changes for food and energy
• C)core inflation is reported for the CPI but not the for the PCE deflator
• D)the PCE deflator measures the average price change of a market basket of consumer goods
• E)the PCE deflator only measures price changes in energy

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Definitions:

Risk-Loving Investors

Individuals who prefer investments with a high level of risk in the hope of realizing higher returns compared to safer investments.

Rate of Return

The percentage of net gain or loss on an investment over a specified period, showing the efficiency of an investment.

Fair Game

An investment prospect that has a zero risk premium.

Risk Premium

The extra return above the risk-free rate that investors require to compensate them for choosing to invest in a risky asset.