The Aggregate Demand Curve Is Downward Sloping Because a Higher

question 13

Multiple Choice

The aggregate demand curve is downward sloping because a higher inflation rate leads the central bank to ________ real interest rates,thereby ________ the level of equilibrium aggregate output. ,everything else held constant.

• A)raise;lowering
• B)raise;raising
• C)reduce;lowering
• D)reduce;raising

---

Definitions:

Historical Beta

A measure of a stock's volatility in relation to the market, based on past performance.

Beta

A measure of the volatility, or systemic risk, of a security or a portfolio in comparison to the market as a whole; it indicates the tendency of a security's returns to respond to swings in the market.

CAPM (Capital Asset Pricing Model)

A model used to determine the expected return on an investment based on its level of risk, as well as the risk-free rate of return and the expected market return.

Risk Premium

The extra return expected by an investor for holding a risky asset compared to a risk-free asset, as compensation for the higher risk.