In the Fooling Model,AD/SAS Equilibria to the Right of LAS

question 116

Multiple Choice

In the fooling model,AD/SAS equilibria to the right of LAS are unstable because ________ nominal wages shift ________.

• A)falling,AD downward
• B)falling,SAS downward
• C)rising,AD upward
• D)rising,SAS upward

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Definitions:

Price Risk

The risk that the price of a financial asset will fluctuate, affecting the profit or loss of an investment.

Reinvestment Risk

The risk that future proceeds will have to be reinvested at a lower potential interest rate.

Interest Rate Risk

The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between two rates, or in any other interest rate measure.

Duration Of Assets

The sensitivity of an asset's price to interest rate changes, expressed in years.