If the Equilibrium Price for Some Product Is $1000, a Price

question 111

Multiple Choice

If the equilibrium price for some product is $1000, a price ceiling of $1200 will result in

• A) the same general effects as an administered price of $1200.
• B) massive surpluses of the good.
• C) the same general effects as a price floor of $1200
• D) no effects because the price ceiling is not binding at that price.
• E) the same general effects as a price ceiling of $600.

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Definitions:

Inflation Rate

The speed at which the overall price level of goods and services increases, leading to a decrease in purchasing power.

Nominal Interest Rate

The interest rate expressed in terms of annual amounts currently charged for interest and not adjusted for inflation.

Real Interest Rate

The interest rate expressed in dollars of constant value (adjusted for inflation) and equal to the nominal interest rate minus the expected rate of inflation.

Interest

The cost of borrowing money or the return earned on investments, typically expressed as a percentage.