Which of the Following Statements Is True

question 75

Multiple Choice

Which of the following statements is true?

• A) The multiplier effects for policy changes that are perceived to be temporary are smaller than those for policy changes that are perceived to be permanent.
• B) The multiplier effects for policy changes that are perceived to be temporary are larger than those for policy changes that are perceived to be permanent.
• C) The multiplier effects for policy changes that are perceived to be temporary are the same as those for policy changes that are perceived to be permanent.
• D) There is no relationship between the size of the multiplier effect and whether policy changes are perceived to be temporary or permanent.

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Definitions:

Hedge Ratio

The ratio of the size of a position in a hedging instrument to the size of the exposure it seeks to hedge.

Call Option

A financial contract giving the buyer the right, but not the obligation, to purchase a stock, bond, commodity, or other asset or instrument at a specified price within a specific time period.

Put Option

This contract permits a person to have the option, without being compelled, to sell a certain amount of a base asset at a fixed price within a designated timeframe.