Because of Transactions Which Take Place in the Underground Economy

question 132

Multiple Choice

Because of transactions which take place in the underground economy, the

• A) GDP calculation tends to overstate the actual value of goods sold in the economy.
• B) GDP calculation tends to accurately portray the value of goods sold in the economy.
• C) GDP calculation tends to understate the actual value of goods sold in the economy.
• D) value of the GDP calculation will be equal to the value of the national income calculation.
• E) value of the GDP calculation through the expenditure approach will be greater then the value calculated through the income approach.

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Definitions:

Treynor-Black Model

A special case of the Markowitz model of efficient diversification, derived by assuming returns are generated by the index model.

Residual Variance

The variance of the error terms in a regression model, representing the amount of variation that cannot be explained by the model's inputs.

Alpha/Beta

Measures in finance; Alpha represents the strategy's returns above the benchmark, whereas Beta indicates the volatility relative to the market.

Sharpe Measure

A measure of the excess return (or risk premium) per unit of risk in an investment asset or a trading strategy, calculated as the difference between the asset's returns and the risk-free rate, divided by the asset's standard deviation.