In an Effort to Reduce the Federal Budget Deficit, Congress

question 78

Multiple Choice

In an effort to reduce the federal budget deficit, Congress has decided to reduce the amount of money spent on Medicare and Medicaid. How does this affect the equilibrium price and quantity of medical services?

• A) They are not affected.
• B) They have risen as demand has increased, but supply has remained constant.
• C) They have fallen because demand has decreased and supply has held constant.
• D) They have risen because supply and demand have decreased.
• E) Equilibrium price has fallen and quantity has risen because demand has decreased and supply has held constant.

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Definitions:

Working Capital Policy

A company's strategy concerning managing its current assets and liabilities to ensure it has sufficient liquidity to meet its short-term obligations.

Factoring Accounts Receivable

A financial transaction whereby a business sells its accounts receivable to a third party at a discount in exchange for immediate cash.

Without Recourse

A financial term indicating that the seller of an asset is not liable if the underlying assets fail to perform as expected.

Maturity Factoring

A form of financing where a business sells its invoices to a factor at a discount for immediate cash, with the collection of funds from customers handled by the factor upon maturity.