Asked by Victoria Hines on Jul 15, 2024
Verified
Suppose you have an asset with a return that rises as GDP increases.How will the asset's return be affected if the government announces that GDP is unexpectedly higher than was previously thought?
A) The return will increase.
B) The return will remain unchanged.
C) The return will decrease.
D) It is undetermined and more information is needed.
GDP
Gross Domestic Product, a measure of the economic performance of a country, representing the total value of all goods and services produced over a specific time period.
Asset Return
A measure of the earnings generated by an asset over a particular period, often expressed as a percentage of the asset's initial cost.
Government Announcement
Government announcements are official statements or publications made by a government that can impact markets, policy, and public perception.
- Understand the impact of macroeconomic variables, such as GDP growth, on stock returns.
Verified Answer
TZ
Trillest ZariTvJul 19, 2024
Final Answer :
A
Explanation :
If the asset's return is positively correlated with GDP, then an unexpected increase in GDP would lead to an increase in the asset's return. Therefore, the best choice is A.
Learning Objectives
- Understand the impact of macroeconomic variables, such as GDP growth, on stock returns.