A Future Contract Is More Flexible Than a Forward Contract

question 46

Multiple Choice

A future contract is more flexible than a forward contract because:

• A) the future price is preset today.
• B) it is available in a wider variety of amounts.
• C) it trades on an organized exchange.
• D) prices are published in the newspaper.

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Definitions:

Expected Price Level

The anticipated average level of prices for all goods and services in an economy for a future period, influenced by current and forecasted economic conditions.

Real Wage

The buying capacity of salaries once corrected for inflation, showing the amount of products and services that can be purchased.

Nominal Wage

The wage or salary paid to labor in current dollars, unadjusted for inflation, representing the face value of earned income.

Price Level

Refers to the average of all current prices for goods and services in an economy.