Suppose There Are Two Countries That Are Identical with the Following

question 4

Multiple Choice

Suppose there are two countries that are identical with the following exception.The saving rate in country A is greater than the saving rate in country B.Given this information,we know that in the long run

• A)output per capita will be greater in B than in A.
• B)output per capita will be greater in A than in B.
• C)economic growth will be higher in A than in B.
• D)more information is needed to answer this question.

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Definitions:

Treynor-Black Model

A portfolio optimization model that integrates market equilibrium theory with security selection to enhance portfolio performance.

Nonsystematic Risk

The risk associated with an individual asset or company, which can be reduced through diversification, unlike systematic risk.

Mispriced Securities

Financial instruments whose market prices deviate from their fair values due to various factors like information asymmetry or market inefficiencies.

Treynor-Black Model

A portfolio optimization model that blends a risky asset portfolio optimized for maximum Sharpe ratio with a risk-free asset.