Suppose That in Year 1 Every Adult in the Country

question 29

Multiple Choice

Suppose that in year 1 every adult in the country works 40 hours a week and GDP is $6.7 trillion.In year 2 every adult in the country works 45 hours a week and GDP is $7.5 trillion.Which of the following statements is true?

• A) Per-capita GDP is necessarily higher in year 2 than year 1.
• B) People are "better off" in year 2 than in year 1 because there are more goods and services in year 2 than year 1.
• C) Government transfer payments were higher in year 2 than in year 1.
• D) a and b
• E) none of the above

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Definitions:

Underlying Asset

The underlying security that determines the value of a derivative, including equities, fixed income, raw materials, or foreign exchange.

Payoff

The return or outcome received from an investment or action.

Convertible Bond

A type of bond that can be converted into a predetermined number of the issuing company's shares at certain times during its life, usually at the discretion of the bondholder.

Conversion Value

The value of a convertible security if it is converted into the underlying stock.