The Foreign Purchases Effect Suggests That an Increase in the U.S

question 211

Multiple Choice

The foreign purchases effect suggests that an increase in the U.S. price level relative to other countries will

• A) increase the amount of U.S. real output purchased.
• B) increase U.S. imports and decrease U.S. exports.
• C) increase both U.S. imports and U.S. exports.
• D) decrease both U.S. imports and U.S. exports.

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Definitions:

Beta

An indicator of the level of fluctuation, or inherent risk, of an investment or group of investments relative to the overall market.

Dollar-Weighted Return

A method of calculating an investment's return that takes into account the timing and amount of cash flows into and out of the investment.

Time-Weighted Return

A method to measure the compound rate of growth in a portfolio, eliminating the effect of cash flows in and out of the portfolio.

Comparison Universe

A benchmark or group of benchmarks that portfolios are compared against to evaluate their performance or risk characteristics.