Suppose the Price of a Quart of Milk Rises from $1.00

question 30

Multiple Choice

Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60. If the CPI rises from 150 to 195, then people likely will buy

• A)more milk and more T-shirts.
• B)more milk and fewer T-shirts.
• C)less milk and more T-shirts.
• D)less milk and fewer T-shirts.

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Definitions:

Optimal Risky Portfolio

A portfolio that offers the highest expected return for a given level of risk or the lowest risk for a given level of expected return.

Expected Return

The average return anticipated on an investment over a given period, accounting for the different rates of return and their probabilities.

Portfolio Variance

A measure of the dispersion of the returns of a portfolio, indicating the level of risk involved.

Correlation Coefficient

A numerical indicator that shows the extent of association between two variables' movements.