Which Policy Is an Example of an Expenditure-Switching Policy

question 56

Multiple Choice

Which policy is an example of an expenditure-switching policy?

• A) an increase in the money supply
• B) a decrease in government spending
• C) an increase in business taxes
• D) a decrease in import tariffs

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Definitions:

Security Market Line

A graphical representation of the expected return of all risky marketable securities as a function of their beta, or systemic risk, according to the capital asset pricing model.

Diversifiable Risk

Relates to the risk that can be reduced or eliminated from a portfolio by holding a variety of investments.

Non-Diversifiable Risk

A type of investment risk that cannot be eliminated through diversification, arising from factors that affect all companies.

Efficient Markets Hypothesis (EMH)

The hypothesis is that actual capital markets, such as the TSX, are efficient.