Figure 12-2 -Refer to Figure 12-2.Suppose That the Level of GDP Associated

question 22

Multiple Choice

Figure 12-2
-Refer to Figure 12-2.Suppose that the level of GDP associated with point K is potential GDP.If the U.S.economy is currently at point N,

• A)firms are operating below capacity.
• B)the economy is at full employment.
• C)the economy is in an expansion.
• D)the level of unemployment is above the natural rate.

---

Definitions:

Macro Factors

Economic, social, political, and environmental variables that affect the performance of the global and regional economy.

Risk Premiums

Additional returns expected by investors for taking on higher risk compared to a risk-free asset, to compensate for the increased uncertainty.

Multifactor Model

A financial model that evaluates securities by considering multiple economic and financial factors to explain market phenomena and/or rates of return.

Expected Return

The mean value of the probability distribution of possible returns from an investment or portfolio.