Whether a Subsidy for a Certain Good Is Given to a Demander

question 31

Multiple Choice

Whether a subsidy for a certain good is given to a demander or supplier is irrelevant because

• A) in either case,the price that the demander has to pay will decrease;while the price the supplier receives will increase
• B) in either case,the price that the demander has to pay will increase;while the price the supplier receives will decrease
• C) either situation will create excess demand
• D) either situation will create excess supply
• E) none of these are correct

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Definitions:

Gross Investment

The total amount spent on new capital assets, before accounting for depreciation, indicating the level of investment in an economy's productive capacity.

Net Investment

The total a company invests in new capital assets, minus the cost of depreciation.

Bondholders

Individuals or institutions that hold the debt securities issued by governments or corporations, entitled to receive interest payments and the principal on maturity.

Common Stockholders

Individuals or entities that own shares of common stock in a company, granting them certain rights like voting on corporate matters.