Stimulating or Contracting the Economy Via Changes in Interest Rates

question 22

Multiple Choice

Stimulating or contracting the economy via changes in interest rates is an example of the government's use of:

• A) fiscal policy
• B) industrial relations policy
• C) monetary policy
• D) welfare policy

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Definitions:

Rate of Return

The percentage of net gain or loss on an investment over a specified period, showing the efficiency of an investment.

Fair Game

An investment prospect that has a zero risk premium.

Risk Premium

The extra return above the risk-free rate that investors require to compensate them for choosing to invest in a risky asset.

Portfolio Volatility

A measure of the dispersion of returns for a given security or market index, indicating how much the total value of the portfolio's assets fluctuates over time.