Because the Liquidity-Preference Framework Focuses on the

question 108

Multiple Choice

Because the liquidity-preference framework focuses on the

• A)short run,it assumes the price level adjusts to bring the money market to equilibrium.
• B)short run,it assumes the interest rate adjusts to bring the money market to equilibrium.
• C)long run,it assumes the price level adjusts to bring the money market to equilibrium.
• D)long run,it assumes the interest rate adjusts to bring the money market to equilibrium.

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Definitions:

Basis

In finance, refers to the difference between the spot price of an asset and its future price, or to the initial value used for tax purposes.

Futures Price

The agreed-upon price for the purchase or sale of an asset at a future date in a futures contract.

Spot Price

The current market price at which an asset, such as securities, commodities, or currencies, can be bought or sold for immediate delivery.

Basis Risk

The possibility that a futures contract's price won't align with the movements of the underlying asset's price, resulting in potential financial losses during hedging activities.