The IS Curve ________

question 89

Multiple Choice

The IS curve ________.

• A)shows the relationship between aggregate output and the real interest rate when the goods market is in equilibrium
• B)tells us that increases in autonomous consumption,investment,government purchases,or net exports raise output for any real interest rate
• C)tells us that a decrease in taxes or in financial frictions leads to an increase in output for any given real interest rate
• D)all of the above
• E)none of the above

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Definitions:

Risk-Free Rate

The expected profit from an investment that carries no risk of losing money, frequently depicted through the interest rate of government bonds.

Market Portfolio

A theoretical bundle of all possible investments in the market, combined in such a way as to maximize the expected return for a given level of risk.

Beta

A measure of a security's volatility in relation to the overall market.

P/E Ratio

The price-to-earnings ratio is a valuation measure comparing the current share price of a company to its per-share earnings.