Author Question: Empirical evidence shows that prices are sticky ________. A) in all sectors of the economy B) in ... (Read 82 times)

leilurhhh · **on:** Jun 30, 2018

Empirical evidence shows that prices are sticky ________.

A) in all sectors of the economy
B) in hardly any sectors of the economy
C) except in response to changes within individual markets
D) all of the above
E) none of the above

Question 2

Why do futures have lower information costs and higher liquidity than forward contracts?

What will be an ideal response?

bbburns21 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

C

Answer to Question 2

The exchange stands as a counterparty to each trade, thus reducing counterparty risk and information costs. The reduced risk and information costs, along with the standardization of contract terms, increase the willingness of investors to buy and sell futures contracts. The large number of buyers and sellers results in increased liquidity.