A Hedger Who Buys a Futures Contract Is Betting That

question 61

Multiple Choice

A hedger who buys a futures contract is betting that prices will _____ at the expiration of the contract.

• A) decrease
• B) increase
• C) remain constant
• D)guarantee high profits

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Definitions:

Quantity Supplied

The total amount of a good or service that sellers are willing and able to sell at a given price over a specified period.

Excess Demand

A situation where the quantity of a good or service demanded exceeds the quantity supplied at a given price, often leading to shortages.

Price Floor

A government or regulatory minimum price set above the equilibrium price, intended to protect producers.

Surplus

An excess amount of a product or resource relative to demand, often leading to lower prices or stockpiling.