Historical Studies of Investment Returns Suggest That the Stocks of Small

question 5

True/False

Historical studies of investment returns suggest that the stocks of small companies generate higher returns than the stocks of larger companies.

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Definitions:

Aggregate Expenditure

The total amount of spending in the economy that includes consumption, investment, government purchases, and net exports.

Simple Spending Multiplier

The ratio of a change in real GDP demanded to the initial change in spending that brought it about; the numerical value of the simple spending multiplier is 1/(1 + MPC); called “simple” because only consumption varies with income.

Marginal Propensity

Describes the portion of additional income that an individual is willing to spend on consumption rather than saving.

Off-Balance Sheet Financing

Off-balance sheet financing is the use of funding or financial activities not recorded on the company's balance sheet to keep debt ratios low.