Suppose Real GDP Increases from $9 Trillion to $10 Trillion

question 328

Multiple Choice

Suppose real GDP increases from $9 trillion to $10 trillion. As a result, consumption expenditure increases from $9 trillion to $9.75 trillion. This result implies the MPS equals

• A) 0.25.
• B) 0.75.
• C) 0.
• D) some amount that cannot be determined without more information.

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Definitions:

Intrinsic Value

The inherent worth of an asset, often calculated based on fundamentals, without reference to its market value.

Time Premium

The portion of an option's price that exceeds its intrinsic value, representing the extra amount paid for the possibility that the stock’s price will move before expiration.

Minimum Floor Value

The least possible value guaranteed for a specific financial instrument or investment.

Convertible Bond

This bond variant grants the holder the option to exchange it for a fixed amount of the issuer's stock at specific intervals during the bond's duration, typically based on the bondholder's decision.