Because Prices Are Slow to Move in the Short-Run, When

question 1

Multiple Choice

Because prices are slow to move in the short-run, when the Bank of Canada lowers the overnight rate, ________.

• A) nominal interest rates rise
• B) real interest rates fall
• C) inflation falls
• D) real interest rates rise

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Definitions:

Price Discrimination

A pricing approach in which the same provider sells the same or nearly the same products or services for different prices in distinct markets or to various customers.

Elasticities of Demand

A measure of how much the quantity demanded of a good responds to a change in price, indicating the sensitivity of consumers to price changes.

Economic Incentive

A financial or material benefit that motivates individuals or businesses to act in certain ways or pursue particular courses of action.