Price Ceilings and Price Floors

question 172

Multiple Choice

Price ceilings and price floors:

• A)cause surpluses and shortages respectively.
• B)make the rationing function of free markets more efficient.
• C)interfere with the rationing function of prices.
• D)shift demand and supply curves and therefore have no effect on the rationing function of prices.

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Definitions:

Nominal Discount Rate

The rate of interest quoted or advertised on a loan or investment, not adjusted for inflation.

Inflation

The speed at which overall prices for goods and services increase, leading to a decline in purchasing power.

Nominal Interest Rates

The rate of interest before adjustment for inflation, representing the face value of borrowing costs or investment returns.

Real Interest Rates

Interest rates adjusted for inflation, showing the real cost of borrowing or real yield of saving.