If the Price of Ice in a Hurricane-Devastated Area Suddenly

question 32

Multiple Choice

If the price of ice in a hurricane-devastated area suddenly skyrockets, then ice suppliers will:

• A) enjoy high profits at the expense of consumers.
• B) limit the supply of ice in the area to sustain the skyrocketing price.
• C) ship more ice to the area and the price will fall.
• D) have an incentive to direct ice to its highest-valued uses.

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Definitions:

Price Level

An index that measures the average of current prices of goods and services in comparison with the prices in a base year.

Money Demand Curve

A graphical representation that shows the relationship between the quantity of money people want to hold and the interest rate.

Interest Rate

The sum, as a percentage of the principal, required by a lender from a borrower for the employment of assets.

Real GDP

Real GDP represents the total value of all goods and services produced over a specific time period, adjusted for inflation. It provides a more accurate measure of economic growth.