The Smaller the Slope of the AE Curve

question 418

Multiple Choice

The smaller the slope of the AE curve,

• A) the greater is the value of the multiplier.
• B) the smaller is slope of the saving function.
• C) the steeper is the consumption function.
• D) the smaller is the value of the multiplier.

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Definitions:

Interest Rate Risk

The potential loss in value of an investment due to a change in interest rates.

Junk Bonds

Junk bonds are high-yield bonds that carry a higher risk of default compared to investment-grade bonds, offering higher interest rates to compensate for the increased risk.

Interest Rate Risk

The potential for investment losses due to fluctuations in the interest rates, affecting the value of interest-bearing assets like bonds.

Variable Rate Coupons

Bonds or other loans that have interest payments adjusted at periodic intervals based on a reference interest rate.