According to Portfolio Theory If You Do Not Want to Bear

question 4

Multiple Choice

According to Portfolio Theory if you do not want to bear much risk:

• A) Don't invest in risky assets.
• B) Buy a diversified mixture of risky assets and lever your investment by borrowing.
• C) Buy a diversified mixture of risky assets and also invest in Government bonds.
• D) Invest only in efficient markets.

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Definitions:

Multiplier

A factor that quantifies the change in economic output resulting from a change in fiscal or monetary input.

MPC

Marginal Propensity to Consume, a measure of how much consumption changes with a change in income.

Aggregate Demand

The total demand for all goods and services within a particular economy at a given overall price level and in a given time period.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money they borrow from a lender, often expressed as an annual percentage rate (APR).