One of the Reasons for Constructing a Policy Statement Is

question 38

Multiple Choice

One of the reasons for constructing a policy statement is it

• A) creates a standard by which to judge the performance of the investor.
• B) helps the investor decide on realistic investment goals.
• C) is open-ended in order to provide guidance for specific investments and time frames.
• D) guarantees success.
• E) helps the portfolio manager to become familiar with financial markets and investing risks.

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Definitions:

Opportunity Cost

The penalty of bypassing the alternative that ranks second in preference while making a choice.

Investment

The process of distributing funds with the aim of earning returns or profits.

Aggregate Expenditure Line

A graphical representation that shows the total amount of spending in an economy (consumption, investment, government spending, and net exports) at various levels of income.

Marginal Propensity to Consume

The fraction of any increase in disposable income spent on consumption, highlighting how consumption changes as income changes.