Which of the Following Could Be a Cause of Consumption

question 21

Multiple Choice

Which of the following could be a cause of consumption increasing?

• A) Income decreases.
• B) Interest rates increase.
• C) Wealth increases.
• D) Expected future income decreases.

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Definitions:

Writer

In the context of options, the writer is the seller who grants the right to the buyer in exchange for a premium, assuming the risk that the asset may have to be delivered under the contract terms.

Premium

The amount by which the price of something, such as a security or insurance policy, exceeds its face value or principal.

European Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an asset at a specified price on a specified date.

Exercise Price

The price at which the holder of an option contract may buy (in the case of a call option) or sell (in the case of a put option) the underlying asset when the option is exercised.