In Figure 11

question 119

Multiple Choice

In Figure 11.1,assume that Q_F is full-employment output and the level of aggregate spending is represented by AD₁.If AD₁ increases to AD₂,which of the following statements is correct?

• A)Full employment will be reached.
• B)Excess AD and inflation will be the result.
• C)Full employment will not be reached because some of the additional spending results in higher prices rather than higher output.
• D)A lower price level will result.

---

Definitions:

Warrants

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a security at a predetermined price before a specific date.

Convertibles

Convertibles are bonds or preferred stocks that can be converted into a predetermined number of common stock or equity shares.

Coupon Rate

The percentage rate at which a bond's face value accrues interest each year.

Straight Debt

A fixed-income security, such as a bond, that has a predetermined interest rate, maturity, and principal repayment schedule.