The Enforcement of Contracts by the Government

question 69

Multiple Choice

The enforcement of contracts by the government:

• A) encourages economic growth.
• B) allows people to enter into long-term investments more easily.
• C) can increase physical capital investment.
• D) All of these are true.

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Definitions:

Derivative Security

A financial instrument whose value is based on the value of another asset.

Economic Exposure

Long-term financial risk arising from permanent changes in prices or other economic fundamentals.

Cross-Hedging

Hedging an asset with contracts written on a closely related, but not identical, asset.

Basis Risk

Risk that futures prices will not move directly with the cash price hedged.