The usefulness of a model is determined by
A. how many of the possible relationships that exist are included in the model.
B. how well it uses the ceteris paribus assumption.
C. whether it possesses realistic assumptions.
D. whether it helps to explain or predict real world phenomena.
Answer: D
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Does fiscal policy affect monetary policy?
A) No, because real output and income can and sometimes do move in the opposite direction from nominal money output and income. B) Yes, because the Fed and the Treasury naturally tend to pursue similar goals. C) Yes, because government deficits or surpluses affect the total demand for credit. D) Yes, because the government usually prints new money to finance deficits and retires that money when it runs a surplus.
What is meant by diversifying an investment portfolio? What are the advantages of diversification?
What will be an ideal response?