The time value of the option should:
A. approach infinity at expiration.
B. increase the longer the time to expiration.
C. decrease the longer the time to expiration.
D. not change with time to expiration.
Answer: B
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Refer to Figure 16-6. In the dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is expected to go to point B in year 2, Congress and the president would most likely
A) increase taxes. B) increase the money supply and decrease the interest rate. C) increase government spending. D) increase oil prices. E) raise interest rates.
Which of the following statements best describes price flexibility in the economy?
A. Prices tend to be sticky in the short run and stuck in the long run. B. Prices tend to be just as sticky in the short run as in the long run. C. Prices tend to be sticky in the short run but become more flexible over time. D. Prices tend to be flexible in the short run but become more sticky over time.