Refer to the Given Graph

question 94

Multiple Choice

Refer to the given graph. A shift of the consumption schedule from C2 to C1 might be caused by a(n)

• A) increase in real GDP.
• B) reverse wealth effect, caused by a decrease in stock market prices.
• C) decrease in income tax rates.
• D) decrease in saving.

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Definitions:

Industrial Production

An economic indicator that measures the level of output in the manufacturing, mining, electric, and gas industries.

Long-term Interest Rates

Interest rates on loan agreements or debt instruments, like bonds, which are due in more than one year.

Market Risk Premium

The additional return expected by investors for taking on the risk of investing in the stock market over a risk-free asset.

Stock Beta

A measure of a stock's volatility in comparison to the overall market. A beta higher than 1 implies greater volatility.