Other Things Held Constant, If the Expected Inflation Rate Decreases

question 74

Multiple Choice

Other things held constant, if the expected inflation rate decreases, and at the same time investors become more risk averse, the Security Market Line (SML) would shift _____.

• A) down and have a steeper slope
• B) up and have a less steep slope
• C) up and keep the same slope
• D) down and keep the same slope
• E) down and have a less steep slope

---

Definitions:

Concurrent Validity

Concurrent validity is the extent to which test scores or measurements are correlated with other measures or outcomes that are theoretically related and taken at the same time.

Predictive Validity

How well a result from a test or scale forecasts subsequent performance in a connected area.

Face Validity

The degree to which a test or measure appears effectively to assess what it is supposed to assess, based on casual inspection.

Content Validity

An indicator of construct validity of a measure in which the content of the measure is compared to the universe of content that defines the construct.