Use the Information Below to Answer the Following Questions

question 32

Multiple Choice

Use the information below to answer the following questions.
Fact 17.4.1
Water is a natural resource that is plentiful in Canada but not plentiful in Arizona and southern California.Suppose Canadians start to export bulk water to Arizona and southern California.
-Refer to Fact 17.4.1.The Hotelling Principle ________ apply to Canada's water because the Hotelling Principle ________.

• A)does;applies to renewable resources and water is a renewable resource
• B)does;only applies when the interest rate is falling
• C)does not;applies to nonrenewable resources but water is a renewable resource
• D)does not;only applies when the interest rate is rising
• E)does;applies when interest rates are relatively low

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Definitions:

Real Rate

The interest rate adjusted for inflation, providing a more accurate indication of the borrowing cost or investment return in terms of real purchasing power.

Principal

The original sum of money borrowed in a loan, or the original amount invested, excluding any interest or dividends.

Inflation

The pace at which prices for general goods and services ascend, diminishing the capacity to purchase.

Price Appreciation

refers to an increase in the value of an asset over time, typically evidenced by a higher market price.