Figure 10.3 Panel (A) Panel (B)

question 46

Multiple Choice

Figure 10.3

Panel (a) Panel (b)
-Refer to Figure 10.3..A negative demand shock with no change in the real interest rate is best represented by ________ in panel (a) and ________ in panel (b) .

• A) a shift from AE₃ to AE₂; a shift from IS₂ to IS₁
• B) a shift from AE₂ to AE₃; a shift from IS₁ to IS₂
• C) a shift from AE₂ to AE₁; a movement from point B to point A
• D) a shift from AE₃ to AE₁; a movement from point C to point A

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Definitions:

Macroeconomic Risks

Considered broad economic or political uncertainties that could affect the performance of financial markets and investments globally.

Security Selection

The process of choosing individual securities for investment with the goal of achieving the best possible return for a given level of risk.

Passive Strategy

A portfolio decision that avoids any direct or indirect security analysis. See passive management.

Index Funds

Investment funds designed to replicate and track the components of a market index.