Suppose That the Wage for Musicians Decreases Relative to Other

question 117

Multiple Choice

Suppose that the wage for musicians decreases relative to other occupations. We know that ________ people will work in music, and the total number of hours worked will ________.

• A) more; increase
• B) more; decrease
• C) fewer; increase
• D) fewer; decrease

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Definitions:

Duration

A measure of the sensitivity of a bond's price to changes in interest rates, essentially a weighted average of the time until cash flows are received.

Coupon Bond

A type of bond that pays the holder a fixed interest payment (coupon) at regular intervals until the maturity date, when the principal amount is repaid.

Maturity

The expiration date of a financial instrument, at which point the principal (and all remaining interest) is due to be paid.

Coupon Rate

The annual interest rate paid by bond issuers on the bond's face value.