The Theory of Portfolio Choice Suggests That the Most Important

question 83

Multiple Choice

The theory of portfolio choice suggests that the most important factor affecting the demand for domestic and foreign assets is the ________ on these assets relative to one another.

• A)interest rate
• B)risk
• C)expected return
• D)liquidity

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Definitions:

Relatively Inelastic

Describes a situation where the demand for a good or service only slightly changes in response to price changes.

Relatively Elastic

A description of a situation where the demand for a good or service significantly changes in response to a change in price.

Excise Tax

A tax on the sale or production for sale of specific goods within a country, typically on commodities like alcohol and tobacco.

Specific Items

Goods or commodities that are distinctly identified and provided in a market or contract.