Does a Subsidy to Sellers Affect the Demand Curve

question 103

Multiple Choice

Does a subsidy to sellers affect the demand curve?

• A) Yes; the demand curve shifts up by the amount of the subsidy.
• B) Yes; the demand curve shifts to the right by the amount of the subsidy.
• C) No; the demand curve does not move, as quantity demanded increases instead.
• D) No; the demand curve does not move, as quantity demanded decreases instead.

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Definitions:

Financial Leverage

Employing debt to boost the potential earnings from an investment.

Debt-Equity Ratio

A ratio illustrating the financial strategy of using debt versus equity in asset financing for a company.

Negative Net Worth

A financial situation where total liabilities exceed total assets, indicating financial distress.

Technical Insolvency

A situation where a company is unable to meet its short-term liabilities due to a lack of liquid assets, even though its total assets may exceed its liabilities.