If Two Goods, X and Y, Have a Positive Cross-

question 122

Multiple Choice

If two goods, X and Y, have a positive cross- elasticity of demand, then we know that they

• A) each have a price elasticity greater than one.
• B) are complements.
• C) are substitutes.
• D) are both inferior goods.
• E) are both normal goods.

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Definitions:

Financial Asset

Assets that derive value from a contractual claim, such as stocks, bonds, bank deposits, and other investments.

Future Cash Flows

Future cash flows refer to the estimated amount of money that is expected to be received or paid out by a company in future periods.

Sinking Fund

Facilitates the orderly retirement of a bond issue. This can be achieved in one of two ways: the company can call in for redemption (at par value) a certain percentage of bonds each year or the company may buy the required amount of bonds on the open market.

Equilibrium

The condition under which the intrinsic value of a security is equal to its price; also, its expected return is equal to its required return.