D l Question 2 0.35 pts If an increase in stock prices is purely the result of a
ID: 1134946 • Letter: D
Question
D l Question 2 0.35 pts If an increase in stock prices is purely the result of asset inflation, which of the following has occurred O Real wealth and nominal wealth have both increased O Real wealth has stayed the same, and nominal wealth has increased Real wealth and nominal wealth have both decreased Real wealth has increased, and nominal wealth has remained the same O no change D | Question 3 0.35 pts An example of an intermediate good is: Sweater sold at Macy's O Assembly line equipment for Escalade plant Escalade sold at Cadillac dealership Apple sold at Trader Joes Leather sold to GM, which will be put into an Escalade 20 F2Explanation / Answer
Question 2
When there is an increase in stock prices there is an increase in nominal wealth.
When stock prices increase purely as a result of asset inflation then in that case nominal wealth has increased but entire increase is due to asset inflation or nominal rise in price of stocks.
If we ascertain real wealth (nominal wealth adjusted for price rise) in such case then there would be no change in real wealth.
Thus, if an increase in stock prices is purely the result of asset inflation then real wealth has stayed the same, and nominal wealth has increased.
Hence, the correct answer is the option (2) [Real wealth has stayed the same, and nominal wealth has increased].
Question 3
Intermediate good refers to the good which is used as raw material in the production process and which get physically transformed during the production process.
Leather sold to GM is an intermediate good as this leather would be used to make seats and other things and thus would be used in production process and will get physically transformed.
Hence, the correct answer is the option (5) [Leather sold to GM which will be put into a Escalade].
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