When the Unemployment Rate Is Low, the Impact of Additional

question 86

Multiple Choice

When the unemployment rate is low, the impact of additional spending on real output will

• A) be larger than when the unemployment rate is high.
• B) be smaller than when the unemployment rate is high.
• C) be the same as when the unemployment rate is high.
• D) place downward pressure on the general level of prices, leading to deflation.

---

Definitions:

Single-Index Structure

A model used in finance to describe the returns of a portfolio using a linear relationship between the return of the portfolio and the return of a market index.

Expected Returns

The anticipated average return on an investment, taking into account the probability of different outcomes, including both gains and losses.

Variances of Returns

The measure of the spread between numbers in a data set, representing the average of the squared differences from the mean, specifically used in the context of the returns on investments.

Single-Index Model

A simplified model that explains a security's return with its sensitivity to a single market index.