A Firm Can Hedge the Risk of Upward Movement in Raw

question 75

Multiple Choice

A firm can hedge the risk of upward movement in raw material prices by taking one of the following positions.

• A)Buying a call option
• B)Selling a put option
• C)Buying a put option
• D)Selling a futures contract

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Definitions:

Aggregate Demand

The total demand for all goods and services in an economy at different price levels, typically within a specified time frame.

Great Depression

A severe worldwide economic downturn that took place during the 1930s, marked by high unemployment, sharp deflation, and a significant fall in economic output.

GDP

Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.

Government Purchases

Expenditures by the government on goods and services that directly consume economic resources, distinct from transfer payments.