Draw a Graph That Shows the Payoff and Profit to the Holder

question 39

Essay

Draw a graph that shows the payoff and profit to the holder of a call option at expiration.Draw another graph that shows the payoff to the holder of a put option at expiration.Draw a third graph that shows the payoff of a long straddle at expiration.Be sure to label the axes and all other relevant features of the graphs.

Identify the factors influencing investment according to Keynes.

Explain the impact of fiscal policy on recovering from economic downturns.

Understand the reasons behind the downward slope of the aggregate demand curve.

Comprehend the relationship between savings, investment, and the interest rate.

---

Definitions:

Market Equilibrium

The condition where the quantity of a good or service demanded equals the quantity supplied, resulting in no incentive for price to change.

Output Level

The quantity of goods or services produced by a business within a given period.

Allocative Efficiency

A state of the economy in which production represents consumer preferences; in other words, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.

Long-Run

A period of time in economics during which all factors of production and costs are variable, allowing for complete adjustment to changes.