If Consumption Spending Is Greater Than Disposable Income, Then There

question 288

Multiple Choice

If consumption spending is greater than disposable income, then there is

• A) dissaving.
• B) excess thrift.
• C) positive savings.
• D) negative net investment.

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Definitions:

SML Approach

The Security Market Line approach, a concept in finance that describes the risk vs. return relationship for individual securities, based on the capital asset pricing model (CAPM).

Firm's Beta

A measure of a stock's volatility in comparison to the market as a whole, indicating its riskiness.

Cost of Equity

The return a firm theoretically pays to its equity investors to compensate for the risk they undertake by investing their capital.

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital weighted by each category of capital, including equity and debt, reflective of the risk and cost of each type of financing.