^{Given the Lucas Formulation of Supply Y}i ^{= h[P}i ^-

question 40

Multiple Choice

^{Given the Lucas formulation of supply Y}i ^{= h[P}i ^{- P] + Y}i^{, where Y}i

• A) positive because prices are sticky going down.
• B) negative because the lack of pricing information is positively correlated with output.
• C) positive because, when the relative price of their product rises, firms increase their output.
• D) negative because firms' implicit demand curves are assumed to be negatively sloped.
• E) none of the above.

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Definitions:

Cash-flow Hedge

A hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with an asset or liability or a forecasted transaction.

Purchase Order

An official document issued by a buyer committing to pay the seller for the sale of specific products or services.

Fair-value Hedge

A hedge of the exposure to changes in the fair value of an asset or liability or an unidentified firm commitment that could affect profit or loss.

Drilling Machine

A tool used for making holes in various materials, part of machinery equipment.