When Drawn Against the Real Interest Rate, the Output Demand

question 32

Multiple Choice

When drawn against the real interest rate, the output demand curve unambiguously shifts to the right if either or both of the following occur.

• A)a decrease in current taxes and a decrease in future taxes
• B)an increase in current taxes and a reduction in interest rates
• C)an increase in current taxes and an increase in future taxes
• D)a decrease in current taxes and an increase in future taxes
• E)an increase in current taxes and a decrease in future taxes

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Definitions:

Expected Returns

The average amount of profit or loss an investment is expected to generate, based on historical data.

Portfolio Weights

The percentage composition of a particular holding relative to the total investment portfolio.

Risk-To-Reward Ratio

A benchmark used by investors to gauge the prospective returns of an investment in comparison to the risk associated with securing those returns.

Efficient Market

A type of market where all relevant information is rapidly and correctly reflected in securities prices, allowing them to be bought and sold at their fair value.