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Governments Sometime Create an Excess Demand for a Product by Setting

question 23

True/False

Governments sometime create an excess demand for a product by setting a maximum price that is less than the equilibrium price, resulting in a permanent excess demand for the product. This is known as a price floor.


Definitions:

Effective Rate

The actual interest rate on an investment or loan, accounting for the effect of compounding over a given period.

Operating Loan

Loan negotiated with banks for day-to-day operations.

Bank

A financial institution licensed to receive deposits, offer loans, and provide various financial services, such as currency exchange and wealth management.

Accounts Receivable Turnover

A financial metric indicating how many times a company collects its average accounts receivable balance in a year.

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