The More Staggered Are Labor Contracts

question 38

Multiple Choice

The more staggered are labor contracts,

• A)the more rapidly the economy will adjust to changes in aggregate demand.
• B)the less rapidly the economy will adjust to changes in aggregate demand.
• C)the greater the inflationary effects of a given change in money growth in the medium run.
• D)the less inflationary effects of a given change in money growth in the medium run.

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Definitions:

Macaulay Duration

A measure of the weighted average time until all cash flows from a bond are received, used to gauge a bond's interest rate sensitivity.

Yield To Maturity

A measurement of the annual return an investor can expect from a bond if held to its end date, factoring in its price, interest payments, and time to maturity.

Zero-Coupon Bond

A bond that does not pay periodic interest payments but is sold at a deep discount from its face value and pays its full face value at maturity.

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates, often used as an indication of interest rate risk.