If the Marginal Rate of Substitution Between Future and Current

question 30

Multiple Choice

If the marginal rate of substitution between future and current consumption is less than one, then this consumer exhibits

• A)A positive time preference
• B)A negative time preference
• C)A neutral time preference
• D)An increasing preference

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Definitions:

Security Market Line

A line that represents the risk versus expected return of the market; used to assess the performance of investments compared to the market.

Systematic Risk

The inherent risk associated with the overall market or economy that cannot be eliminated through diversification.

Expected Return

The anticipated return on an investment, calculated as the weighted average of all possible returns with the probabilities of their occurrence.

Recessionary Period

denotes a time of economic decline when the economy reduces its activities significantly, typically marked by decreases in spending and increases in unemployment.