The correct option.

Question

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Answer 1

Question

Chapter 2, Problem 1QQ

To determine

The correct option.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

The nominal gross domestic product measures the value of economy’s total output at present price level and is a flow variable. This nominal GDP measures the output in a particular time period. A variable that measures with the reference of time period is called flow variable. Thus, option (b) is correct.

Option (a):

The nominal GDP measures the economic output in a particular time period, so it is a flow variable (a variable that measures with the reference of time period), not a stock variable (a variable that measurable at a point of time). Thus, option (a) is incorrect.

Option (c):

The value of the economy’s output measured at current price in a particular time period is called nominal GDP. Thus, option (c) is incorrect.

Option (d):

Nominal GDP measures the economic output at current price in a particular time period. Usually, it is for one year not based on a particular point of time. Thus, option (d) is incorrect.

Economics Concept Introduction

Nominal GDP (Gross Domestic Product): Nominal GDP measures the value of economy’s total output in a particular time period.

Flow variable: A flow variable is a variable that can be measured with reference to a period of time.

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Students have asked these similar questions

5. Some people find options expensive and use more complex structures to reduce the cost. For example, consider buying a call with a strike of $55 and selling a call with a strike of $60. a. What is the cost of establishing this combined position? b. What is the payoff of the combined position if the market price goes to $60? c. What is the payoff of the combined position if the market price goes to $100?

3. An investor has $1,000 to invest. They believe the price of the underlier will increase to $60 within one year. a. How many shares of stock could they buy with the $1,000 at the current price of $50, and how much would they make if the share price increased to $60? b. How many calls with a strike of $55 could they buy for the same $1,000, and how much would they make if the share price increased to $60? c. How much would they make (or lose) from the stock and from the calls if the share price declined to $40? 4. What is the premium on a call with a strike of $0.01? Why is the premium so close to the $50 share price?

1. We want to examine the comparative statics of the Black Scholes model. Complete the following table using the Excel model from class or another of your choice. Provide the call premium and the put premium for each scenario. Underlier Risk-free Scenario price rate Volatility Time to expiration Strike Call premium Put premium Baseline $50 5% 25% 1 year $55 Higher strike $50 5% 25% 1 year $60 Higher volatility $50 5% 40% 1 year $55 Higher risk free $50 8% 25% 1 year $55 More time $50 5% 25% 2 years $55 2. Look at the baseline scenario. a. What is the probability that the call is exercised in the baseline scenario? b. What is the probability that the put is exercised? c. Explain why the probabilities sum to 1.

Answer 2

Question

Chapter 2, Problem 1QQ

To determine

The correct option.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

The nominal gross domestic product measures the value of economy’s total output at present price level and is a flow variable. This nominal GDP measures the output in a particular time period. A variable that measures with the reference of time period is called flow variable. Thus, option (b) is correct.

Option (a):

The nominal GDP measures the economic output in a particular time period, so it is a flow variable (a variable that measures with the reference of time period), not a stock variable (a variable that measurable at a point of time). Thus, option (a) is incorrect.

Option (c):

The value of the economy’s output measured at current price in a particular time period is called nominal GDP. Thus, option (c) is incorrect.

Option (d):

Nominal GDP measures the economic output at current price in a particular time period. Usually, it is for one year not based on a particular point of time. Thus, option (d) is incorrect.

Economics Concept Introduction

Nominal GDP (Gross Domestic Product): Nominal GDP measures the value of economy’s total output in a particular time period.

Flow variable: A flow variable is a variable that can be measured with reference to a period of time.

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Answer 3

Question

Chapter 2, Problem 1QQ

To determine

The correct option.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

The nominal gross domestic product measures the value of economy’s total output at present price level and is a flow variable. This nominal GDP measures the output in a particular time period. A variable that measures with the reference of time period is called flow variable. Thus, option (b) is correct.

Option (a):

The nominal GDP measures the economic output in a particular time period, so it is a flow variable (a variable that measures with the reference of time period), not a stock variable (a variable that measurable at a point of time). Thus, option (a) is incorrect.

Option (c):

The value of the economy’s output measured at current price in a particular time period is called nominal GDP. Thus, option (c) is incorrect.

Option (d):

Nominal GDP measures the economic output at current price in a particular time period. Usually, it is for one year not based on a particular point of time. Thus, option (d) is incorrect.

Economics Concept Introduction

Nominal GDP (Gross Domestic Product): Nominal GDP measures the value of economy’s total output in a particular time period.

Flow variable: A flow variable is a variable that can be measured with reference to a period of time.

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Answer 4

Question

Chapter 2, Problem 1QQ

To determine

The correct option.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

The nominal gross domestic product measures the value of economy’s total output at present price level and is a flow variable. This nominal GDP measures the output in a particular time period. A variable that measures with the reference of time period is called flow variable. Thus, option (b) is correct.

Option (a):

The nominal GDP measures the economic output in a particular time period, so it is a flow variable (a variable that measures with the reference of time period), not a stock variable (a variable that measurable at a point of time). Thus, option (a) is incorrect.

Option (c):

The value of the economy’s output measured at current price in a particular time period is called nominal GDP. Thus, option (c) is incorrect.

Option (d):

Nominal GDP measures the economic output at current price in a particular time period. Usually, it is for one year not based on a particular point of time. Thus, option (d) is incorrect.

Economics Concept Introduction

Nominal GDP (Gross Domestic Product): Nominal GDP measures the value of economy’s total output in a particular time period.

Flow variable: A flow variable is a variable that can be measured with reference to a period of time.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 2, Problem 1QQ

To determine

The correct option.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

The nominal gross domestic product measures the value of economy’s total output at present price level and is a flow variable. This nominal GDP measures the output in a particular time period. A variable that measures with the reference of time period is called flow variable. Thus, option (b) is correct.

Option (a):

The nominal GDP measures the economic output in a particular time period, so it is a flow variable (a variable that measures with the reference of time period), not a stock variable (a variable that measurable at a point of time). Thus, option (a) is incorrect.

Option (c):

The value of the economy’s output measured at current price in a particular time period is called nominal GDP. Thus, option (c) is incorrect.

Option (d):

Nominal GDP measures the economic output at current price in a particular time period. Usually, it is for one year not based on a particular point of time. Thus, option (d) is incorrect.

Economics Concept Introduction

Nominal GDP (Gross Domestic Product): Nominal GDP measures the value of economy’s total output in a particular time period.

Flow variable: A flow variable is a variable that can be measured with reference to a period of time.

Answer 6

Chapter 2, Problem 1QQ

To determine

The correct option.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

The nominal gross domestic product measures the value of economy’s total output at present price level and is a flow variable. This nominal GDP measures the output in a particular time period. A variable that measures with the reference of time period is called flow variable. Thus, option (b) is correct.

Option (a):

The nominal GDP measures the economic output in a particular time period, so it is a flow variable (a variable that measures with the reference of time period), not a stock variable (a variable that measurable at a point of time). Thus, option (a) is incorrect.

Option (c):

The value of the economy’s output measured at current price in a particular time period is called nominal GDP. Thus, option (c) is incorrect.

Option (d):

Nominal GDP measures the economic output at current price in a particular time period. Usually, it is for one year not based on a particular point of time. Thus, option (d) is incorrect.

Economics Concept Introduction

Nominal GDP (Gross Domestic Product): Nominal GDP measures the value of economy’s total output in a particular time period.

Flow variable: A flow variable is a variable that can be measured with reference to a period of time.

Answer 7

Chapter 2, Problem 1QQ

To determine

The correct option.

Answer 8

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Option (b):

The nominal gross domestic product measures the value of economy’s total output at present price level and is a flow variable. This nominal GDP measures the output in a particular time period. A variable that measures with the reference of time period is called flow variable. Thus, option (b) is correct.

Option (a):

The nominal GDP measures the economic output in a particular time period, so it is a flow variable (a variable that measures with the reference of time period), not a stock variable (a variable that measurable at a point of time). Thus, option (a) is incorrect.

Option (c):

The value of the economy’s output measured at current price in a particular time period is called nominal GDP. Thus, option (c) is incorrect.

Option (d):

Nominal GDP measures the economic output at current price in a particular time period. Usually, it is for one year not based on a particular point of time. Thus, option (d) is incorrect.