Consider a Simple Macro Model with a Constant Price Level

question 26

Multiple Choice

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 150 + 0.8Yd,Yd = Y-T,I = 400,G = 700,T = 0.2Y,X = 130,and IM = 0.14Y.Equilibrium national income in this model is

• A)1120.
• B)1350.
• C)2240.
• D)2760.
• E)5400.

Understand the concept of beta and its significance in measuring systematic risk.

Grasp the principles behind the Capital Asset Pricing Model (CAPM) and its relation to risk and return.

Identify examples of systematic and unsystematic risks in real-world scenarios.

Comprehend the role of Treasury bills and high-beta stocks in altering portfolio risk.

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Definitions:

Compounded Monthly

Interest on an investment calculated each month on the principal and previously earned interest.

Equivalent Amount

A sum of money that is equal in value to a different amount in another currency or under different conditions.

Present Value

The current value of a future amount of money or stream of cash flows, discounted at a particular interest rate.

Compounded Quarterly

A method of calculating interest where the interest is added to the principal four times a year, resulting in the interest from one quarter earning interest in the next.