Suppose That Before You Started College Your Parents Gave You

question 11

Multiple Choice

Suppose that before you started college your parents gave you $2000 to cover expenses for your first year, like books, supplies, and food. You need this money, and your parents will not replace it if you spend it on items other than school necessities. You want to invest this money in a safe place. When considering where to invest this money, what is the factor that most affects your decision?

• A) your investment horizon
• B) investment diversification
• C) your liquidity needs
• D) asset allocation goals

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Definitions:

Beneficial Supply Shock

An unexpected event that increases the production capacity and decreases the prices of goods and services.

Potential Output

The maximum sustainable level of real GDP over the long term that does not lead to an increase in inflation.

Price Level

This term refers to the average of current prices across the entire spectrum of goods and services produced in the economy.

Aggregate Demand Curve

A curve that represents the total quantity of all goods and services demanded by the economy at different price levels.