On May 10,2011,Rafter Corporation Granted Peter an Option to Acquire

question 83

Multiple Choice

On May 10,2011,Rafter Corporation granted Peter an option to acquire 500 shares of the company's stock for $10 per share.The fair market price of the stock on the date of grant was $12.The fair market value of the option at the date of grant was $3.Peter exercises the option on July 1,2013,when the fair market value of the stock is $20.How much income must Peter report at the date of exercise?

• A)$ -0-
• B)$1,200
• C)$1,800
• D)$3,600
• E)$5,400

Understand how automatic stabilizers like unemployment insurance and welfare programs work during recessions.

Comprehend the mechanisms of fiscal and monetary policies in stabilizing the economy.

Grasp the concept and calculation of the multiplier and its impact on the economy.

Recognize the implications of government expenditures on capital goods for aggregate supply and demand.

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Definitions:

Potential Level

The potential level of output, or potential GDP, is the maximum amount of goods and services an economy can produce when it is fully utilizing its resources, without causing inflation to rise.

Fixed-growth-rate Monetary Policy

A monetary policy framework aiming to maintain a predetermined rate of growth in the money supply.

Active Fiscal Policy

Government policy that involves altering government spending and taxation to influence the economy.

Short-run Phillips Curve

An economic model depicting an inverse relationship between the rate of unemployment and the rate of inflation in the short-term.