Milton Friedman and Edmund Phelps Questioned

question 62

Multiple Choice

Milton Friedman and Edmund Phelps questioned

• A)the use of expectations in the Phillips curve.
• B)the stability of the relationship between inflation and unemployment.
• C)the existence of a natural rate of unemployment.
• D)the existence of a full-employment level of output.

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Definitions:

CAPM

Capital Asset Pricing Model; a model that describes the relationship between risk and expected return and that is used in the pricing of risky securities.

Arbitrage Pricing Theory

A financial model that estimates the price of securities by considering the relationship between their expected returns and macroeconomic factors.

Single Market Index

An index that measures the performance of a specific market segment or region.

Nonsystematic Risk

This type of risk is unique to a specific company or industry and can be reduced through diversification.