Consider the Impact of an Increase in Thriftiness in the Keynesian-Cross

question 90

Multiple Choice

Consider the impact of an increase in thriftiness in the Keynesian-cross analysis. Assume that the marginal propensity to consume is unchanged, but the intercept of the consumption function is made smaller so that at every income level saving is greater. This will:

• A) lower equilibrium income by the decrease in the intercept multiplied by the multiplier.
• B) lower equilibrium income by the decrease in the intercept.
• C) raise equilibrium income by the decrease in the intercept.
• D) raise equilibrium income by the decrease in the intercept multiplied by the multiplier.

Apply the concept of expected return on a portfolio, understanding the impact of diversification and the risk-free rate.

Calculate portfolio beta for mixed portfolios, including stocks, risk-free assets, and the market portfolio.

Determine the systematic risk of a portfolio and how different weightings of assets affect it.

Utilize the Capital Asset Pricing Model (CAPM) to estimate the expected market return and the return on individual securities.

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