Bonds with Relatively Low Risk of Default Are Called ________

question 15

Multiple Choice

Bonds with relatively low risk of default are called ________ securities and have a rating of Baa (or BBB) and above;bonds with ratings below Baa (or BBB) have a higher default risk and are called ________.

• A)investment grade;lower grade
• B)investment grade;junk bonds
• C)high quality;lower grade
• D)high quality;junk bonds

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Definitions:

Induced Consumption

Induced consumption is the portion of consumer spending that increases with income, implying that as people earn more, they tend to spend more.

Disposable Income

Available monetary resources for households post-income tax for spending and saving purposes.

Consumption

The use of goods and services by households. It is a primary component of economic activity and a key indicator of economic health.

Dissaving

Dissaving occurs when expenditures exceed income, leading to a depletion of savings or the accumulation of debt.