Potential GDP Is the Level of Real GDP at Which

question 103

Multiple Choice

Potential GDP is the level of real GDP at which

• A)aggregate demand equals short-run aggregate supply.
• B)there is full employment.
• C)there is a recessionary gap.
• D)there is over-full employment.
• E)prices are sure to rise.

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Definitions:

SML

The Security Market Line (SML) represents the relationship between the expected return of a market security and its risk, measured by beta, within the Capital Asset Pricing Model (CAPM).

Market Portfolio

A theoretical bundle of investments that includes every type of asset available in the market, with each asset weighted by its total market capitalization.

Capital Asset Pricing Model (CAPM)

Equation of the Security Market Line showing the relationship between expected return and beta.

Reward To Risk Ratio

A measure that evaluates the anticipated gains from an investment against the level of risk assumed to achieve these gains.