-In the Above Figure, the Economy Is at Point a on the Initial

question 63

Multiple Choice

-In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF₀. What happens if the real interest rate rises?

• A) The supply of loanable funds curve would shift leftward to a curve such as SLF₁.
• B) Nothing; the economy would remain at point a.
• C) The supply of loanable funds curve would shift rightward to a curve such as SLF₂.
• D) There would be a movement to a point such as b on supply of loanable funds curve SLF₀.

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Definitions:

Unsystematic Risk

The risk associated with individual assets, such as a company's stock, that can be mitigated through diversification.

Beta

A standard for evaluating the unpredictability, or fundamental risk, of a security or diversified portfolio in contrast with the entire market.

Non-diversifiable Risk

The portion of risk that can't be eliminated through diversification, often related to systemic factors affecting all investments.

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of data values.