In the Keynesian Model, It Is Assumed That, When Demand

question 177

Multiple Choice

In the Keynesian model, it is assumed that, when demand for a firm's product changes, the firm:

• A) changes prices to meet the demand.
• B) changes production levels to meet the demand.
• C) changes prices and production levels to meet demand.
• D) changes prices, but holds production levels constant, to meet the demand.

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Definitions:

Security Market Line

A representation in finance that shows the relationship between risk (as measured by beta) and expected return of investments, used in the capital asset pricing model.

Capital Market Line

A line used in the capital asset pricing model to depict the rates of return for efficient portfolios depending on the risk-free rate of return and the level of risk (standard deviation) for a particular portfolio.

Characteristic Line

In finance, a line that describes the relationship between the return on an investment and the return on the market as a whole, used in the Capital Asset Pricing Model.

Systematic Risk

Systemic risk associated with the overall market or a particular segment of the market, widely known as market risk, remains even after diversification efforts.