Consider the Basic AD/AS Macro Model in Long- Run Equilibrium

question 28

Multiple Choice

Consider the basic AD/AS macro model in long- run equilibrium. A negative AS shock will the price level and output in the short run. In the long run, the price level will
And output .

• A)increase; increase; increase further; will be restored to potential output
• B)decrease; decrease; decrease further; will decrease further
• C)increase; decrease; decrease; will be restored to potential output
• D)increase; decrease; increase further; will be restored to potential output
• E)decrease; decrease; decrease further; will be restored to potential output

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Definitions:

Black-Scholes Model

A mathematical model used to price European-style options, identifying the theoretical fair price for puts and calls based on time and other risk factors.

Time Value

The additional amount of money an investor is willing to pay for an option or bond, above its intrinsic value, due to the time left until expiration.

Actual Call Price

The actual price at which a callable bond or other financial instrument can be redeemed by the issuer before its maturity date.

Intrinsic Value

The inherent, true value of an asset, investment, or company, based on its fundamental characteristics and financial health.