If People Expect the Price of Packaged Coffee to Rise

question 275

Multiple Choice

If people expect the price of packaged coffee to rise next week, coffee demand will:

• A) decrease now.
• B) increase now.
• C) stay the same now and increase next week.
• D) stay the same now and decrease next week.
• E) stay the same now and next week.

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Definitions:

Beta

In finance, beta is a measure of a stock's volatility in relation to the overall market; a higher beta indicates greater volatility and therefore higher risk and potential return.

Required Return

The minimum expected yield by investors to compensate for the risk of an investment.

Security Market Line

A representation in financial markets that depicts the relationship between the risk of an asset and its expected return.

Expected Inflation Rate

The anticipated rate at which the general level of prices for goods and services will rise over a period of time.