'It Is Not Fair to Increase the Federal Minimum Wage

question 3

Multiple Choice

'It is not fair to increase the federal minimum wage because it causes an increase in unemployment among teenagers.' This is a:

• A) statement of positive economics.
• B) statement of normative economics.
• C) testable value judgement.
• D) fallacy of composition.

Understand the concept of the Security Market Line (SML) and its implications for required returns based on beta.

Analyze the effects of changes in investor risk aversion on the market risk premium and the slope of the SML.

Describe the impact of the risk-free rate on stock and portfolio returns.

Distinguish between systematic (market) risk and unsystematic (diversifiable) risk.

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Definitions:

Fiscal Policy

Governmental adjustment of its spending levels and tax rates to monitor and influence a nation's economy.

Monetary Policy

Monetary policy involves the management of a nation's money supply and interest rates by its central bank to influence economic activity, inflation, and unemployment.

Effectiveness Lag

The delay between the time a policy or action is implemented and when its effects are observed and felt in the economy or targeted area.

Recognition Lag

The delay between the time when an economic problem or trend is identified and the time when it is officially recognized.