It Can Be Argued That,while Financial Hedging Can Be Used

question 41

Multiple Choice

It can be argued that,while financial hedging can be used to stabilize a firm's cash flows,

• A)it is not a substitute for long-term operational hedging.
• B)it is therefore a substitute for long-term operational hedging.
• C)it is inferior to money market hedging.
• D)none of the options.

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Definitions:

Expansionary Gap

A situation in which the actual output in an economy exceeds the output it would produce at full employment, leading to inflationary pressures.

Potential Output

The maximum level of output an economy can achieve when utilizing its resources fully without causing inflation.

SRAS Curve

The Short-Run Aggregate Supply curve, which shows the relationship between the price levels in an economy and the quantity of goods and services that producers are willing to supply in the short term.

Passive Approach

An investment strategy or management style where decisions are minimal in an effort to mimic the returns of a particular market or index.