Assume That in a Private Closed Economy, Consumption Is $240

question 7

Multiple Choice

Assume that in a private closed economy, consumption is $240 billion and investment is $50 billion, both at the $280 billion level of domestic output. Thus,

• A) saving is $10 billion.
• B) unplanned decreases in inventories of $10 billion will occur.
• C) the MPC is 0.80.
• D) unplanned increases in inventories of $10 billion will occur.

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Definitions:

Convertible Bond

A type of bond that can be converted into a predetermined amount of the issuing company's equity at certain times during its life, usually at the discretion of the bondholder.

Conversion Price

The predetermined price at which convertible security, such as a convertible bond or preferred stock, can be converted into a specified number of shares of common stock.

Conversion Value

The financial value of a convertible security if it is converted into a different form, typically shares of the issuing company's stock.

Call Option Contracts

Financial contracts that give the holder the right, but not the obligation, to buy an asset at a specified price within a specific time frame.