FIGURE 5- 2 -Refer to Figure 5- 2. a Price Ceiling Set at Ceiling

question 68

Multiple Choice

FIGURE 5- 2
-Refer to Figure 5- 2. A price ceiling set at a price of $2.50 per unit will result in

• A) a surplus of 5 units
• B) a shortage of 5 units.
• C) a surplus of 10 units.
• D) a shortage of 10 units.
• E) no change in the market outcomes.

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Definitions:

Effective Annual Rate

The effective annual rate (EAR) is the interest rate on a financial product restated from nominal terms into an annualized rate accounting for compounding over a period.

Loan Contract

A legally binding agreement between a borrower and a lender that outlines the terms and conditions of a loan.

Interest Payments

Regular payments made to lenders or bondholders as compensation for the use of borrowed funds, usually calculated as a percentage of the principal.

Nominal Rate

The stated interest rate of a financial product, not adjusted for inflation, which represents the rate before taking into account the compounding period.