Assume That the Economy Is Initially Operating at the Natural

question 8

Multiple Choice

Assume that the economy is initially operating at the natural level of output. An increase in government spending will cause:

• A) an increase in the real wage in the medium run.
• B) no change in the real wage in the medium run.
• C) a decrease in the real wage in the medium run.
• D) an increase in the nominal wage in the medium run.
• E) a decrease in the nominal wage in the medium run.

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Definitions:

Portfolio's Sigma

A statistical term that represents the standard deviation of returns of an investment portfolio, reflecting its risk.

Mean-Variance Efficient Portfolio

A portfolio construction theory that suggests the best investment portfolio is one that offers the highest expected return for a given level of risk or the lowest risk for a given level of expected return.

Single-Index Structure

A portfolio model that relates the returns on each asset to a single market index.

Sensitivity Coefficients

Measurements that indicate how much the output of a mathematical model or system can change in response to changes in its inputs.