When People Spend More Money Without an Increase in the Supply

question 88

Multiple Choice

When people spend more money without an increase in the supply of goods, prices:

• A) must rise.
• B) must fall.
• C) may rise or fall.
• D) must stay the same.

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Definitions:

Escalator Clauses

Provisions in a contract that allow for an increase in the price or wages under certain conditions, often linked to the cost of living or inflation.

Reference Price

The price that consumers consider reasonable or fair for a product or service, often based on past experiences or comparisons with similar products.

Reasonable Price

A price that is fair and acceptable to consumers, often considered in relation to the value of the product or service.

Unbundling

The process of separating a product or service into individual components which can be sold separately.