If Nominal Wages Are Sticky, Then Nominal Price Stickiness

question 2

Multiple Choice

If nominal wages are sticky, then nominal price stickiness

• A) is likely to result only if there are large costs to changing prices.
• B) is likely to result even if firms set prices at the exact optimum.
• C) is likely to occur only in those cases where firms have limited incentives to set the optimal price.
• D) is likely to occur even in the case of precious metals.
• E) prevails in all products.

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Definitions:

Put Option

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

Vega

The response of option price to a change in the standard deviation of the underlying asset.

Option's Price

The price at which a specific derivative contract can be exercised, determined by factors like the underlying asset's price, time to expiration, and volatility.

Volatility

The rate at which the price of a security increases or decreases for a given set of returns.