Suppose the U

question 206

Multiple Choice

Suppose the U.S.government imposes a binding quota on the number of Japanese-made cars allowed into the United States.Assuming that Japanese-made cars and U.S.-made cars are substitutes in consumption,we would expect the price of Japanese cars to _____ and the price of U.S.-made cars to _____.

• A)increase;increase
• B)increase;decrease
• C)decrease;increase
• D)decrease;decrease

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Definitions:

Inflation Rate

Inflation rate is the annual percentage increase in the general price level of goods and services in an economy over a period of time.

Annually

Occurring once every year, often used to describe financial operations or events that happen yearly.

Interest

The cost of borrowing money, typically expressed as an annual percentage of the loan amount.

Coupon Rate

The annual interest rate paid by bond issuers to its bondholders, usually expressed as a percentage of the bond's face value.