If the Number of Dollars Needed to Buy a Representative

question 107

Multiple Choice

If the number of dollars needed to buy a representative basket of goods falls,the price level

• A)falls,so the value of money falls.
• B)falls,so the value of money rises.
• C)rises,so the value of money falls.
• D)rises,so the value of money rises.

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Definitions:

Risk Premium

The extra return above the risk-free rate that investors demand as compensation for the risk of an investment.

Systematic Risk

The risk inherent to the entire market or market segment, unavoidable through diversification.

Security Market Line

A line that represents the relationship between the risk of an investment and its expected return, based on the capital asset pricing model (CAPM).

Risk-Free Rate

The theoretical rate of return on an investment with no risk of financial loss, often represented by government bonds.