Explain how a diversified portfolio can reduce fluctuations in returns even when the economy as a whole is experiencing contractions and expansions
If an investor divides her holdings among various companies, then her portfolio may perform satisfactorily even if one company goes broke. Moreover, if one company specializes in producing luxury items, which do well in prosperous periods but very badly during recessions, and another company sells inexpensive items, economic fluctuations will impact these companies in opposite directions. In effect, the "ups" and "downs" will offset each other. If an investor holds stock in both companies, her overall risk is obviously less than if she owned stock in only one. All other things being equal, a portfolio containing many different types of securities tends to be less risky and feature less fluctuations in returns than a portfolio with fewer types of securities
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If the government decreases its purchases of goods and services by $12,000 and the MPS is 0.5, GDP and income will eventually decrease by
A) $2,400. B) $6,000. C) $24,000. D) $60,000.
The intersection of GG and LL determines
A) the optimal level of integration desired by Norway. B) the maximum integration level desired by Norway. C) the minimum level of integration that will cause Norway to join the fixed exchange rate regime. D) the maximum level of integration that will cause Norway to join the fixed exchange rate regime. E) the maximum level of integration that can aid Norway if it joins the fixed exchange rate regime.
The balance of payments accounts contain information about the
A. purchases of U.S. financial assets by foreigners. B. purchases of foreign financial assets by U.S. citizens. C. levels of U.S. exports and imports. D. All of the choices/statements are true.
When you set aside the money you have today in order to purchase goods and services later on, you are using money as a
A) store of value. B) medium of exchange. C) standard of deferred payment. D) unit of accounting.