Refer to the Given Graph

question 118

Multiple Choice

Refer to the given graph. A movement from a to b along C1 might be caused by a(n)

• A) recession.
• B) wealth effect of an increase in stock market prices.
• C) increase in income tax rates.
• D) increase in real GDP.

---

Definitions:

Business-Specific Risk

Refers to the uncertainties faced by a company due to the industry it operates in or the nature of its business operations.

Security Market Line

A representation in financial markets that shows the relationship between risk (as measured by beta) and the expected return of a portfolio or individual security.

Stock Market Equilibrium

A situation where the supply of stocks for sale is equal to the demand, and hence the market price is stable.

Required Rates of Return

The minimum annual percentage earned by an investment that will persuade the individual or company to invest.