Starting from Short-Run Equilibrium,the Following Occurs: Individuals Expect Higher (Future)incomes

question 33

Multiple Choice

Starting from short-run equilibrium,the following occurs: individuals expect higher (future) incomes and wage rates rise.What is the effect on the price level and Real GDP in the short run?

• A) The price level rises and Real GDP rises.
• B) The price level falls and Real GDP falls.
• C) The price level rises,but the effect on Real GDP cannot be determined.
• D) Real GDP rises,but the effect on the price level cannot be determined.
• E) Real GDP falls,but the effect on the price level cannot be determined.

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Definitions:

Put Option Contracts

Financial contracts giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Exercise Price

Also known as the strike price, it’s the specified price at which an option contract can be exercised, determining the price at which the underlying security can be bought or sold.

Option Price

The premium that must be paid by the buyer to the seller to acquire the rights that the option confers, without the obligation to buy (call) or sell (put) the underlying asset.