The Tendency of Changes in Asset Prices to Affect Spending

question 2

Multiple Choice

The tendency of changes in asset prices to affect spending on consumption goods is called the ________ effect.

• A)income
• B)substitution
• C)wealth
• D)multiplier

---

Definitions:

Option Price

The premium that must be paid by the buyer to the seller to acquire the rights that the option confers, without the obligation to buy (call) or sell (put) the underlying asset.

Treasury Bills

Short-term government securities issued at a discount from par value and pay no interest, maturing in a year or less.

Call Option

A financial contract giving the buyer the right, but not the obligation, to buy an asset at a specified price within a specific time period.

Exercise Price

The price at which the holder of an option can buy (call) or sell (put) the underlying security.