The Following Question Are Based on the Following Diagram

question 36

Multiple Choice

The following question are based on the following diagram:

-From the diagram,one can infer that the

• A) C + I + G line cannot change.
• B) marginal propensity to save is 1.
• C) multiplier is 2.5.
• D) 45-degree line is unstable.
• E) total intended spending always equals GDP.

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Definitions:

Diversification

An investment strategy aimed at reducing risk by allocating investments among various financial instruments, industries, or other categories.

High Dividends

The distribution of a portion of a company's earnings, decided by the board of directors, to its shareholders, which is considered high relative to other companies or historical payouts.

Moral Hazard

The situation in which an entity has the incentive to take undue risks because the cost of those risks will be borne, at least in part, by others.

Firm-Specific Risk

The risk associated with an individual company, which can be reduced through diversification in investment.