Suppose We Observe a Fall in the Price of Good

question 139

Multiple Choice

Suppose we observe a fall in the price of good A and an increase in the quantity of good A bought and sold.Which one of the following is a likely explanation?

• A)The law of supply is violated.
• B)The demand for A decreased.
• C)The demand for A increased.
• D)The supply of A increased.
• E)The supply of A decreased.

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Definitions:

Nominal Rate

The stated interest rate of a financial product, not adjusted for inflation, representing the face value of interest payments.

Real Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing or the true yield on an investment.

Inflation Rate

The tempo at which the widespread level of prices for goods and services heightens, detracting from the ability to spend.

Zero-Coupon Bonds

Bonds that do not pay periodic interest and are sold at a discount from their face value, with the face value repaid at maturity.