Governments Continue to Impose Price Controls

question 175

Multiple Choice

Governments continue to impose price controls. Which of the following is NOT a valid reason for this?

• A) Some people do benefit from such price controls.
• B) People fear that prices will change dramatically if the price controls are removed.
• C) It is politically expedient to enact regulations that benefit influential voting groups.
• D) Price controls are always effective.

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Definitions:

Hedging

A financial strategy used to reduce or manage risk associated with price movements of assets by taking an opposite position in a related security.

Hedging Relationship

A risk management strategy where two or more financial instruments are used together to offset potential losses in investments.

Hedged Item

A recognized asset or liability, unrecognized firm commitment, or highly probable forecast transaction in a hedging relationship.

Hedge Effectiveness

The degree to which a hedge transaction reduces the risk of fluctuations in the cash flows or value of an underlying exposure.