According to the Income Effect, When the Price of Automobiles

question 65

Multiple Choice

According to the income effect, when the price of automobiles rises, people buy fewer automobiles because

• A) they substitute other forms of transportation for driving.
• B) the nominal amount of their paychecks is smaller.
• C) the purchasing power of their income is reduced.
• D) their demand for automobiles is very elastic.

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Definitions:

Warehouse Financing

A form of inventory financing where loans are made to manufacturers and processors on goods stored in a warehouse as collateral.

Inventory Financing

A line of credit or loan dedicated to purchasing inventory, using the inventory itself as collateral.

Control Agent

An entity or individual assigned to oversee and manage specific aspects of a project, process, or operation to ensure it meets predetermined criteria or standards.

Current Income

This refers to the total amount of income generated from various sources, including wages, investments, and other types of income over a current period of time.