Use the Following Diagram to Answer the Following Questions

question 89

Multiple Choice

Use the following diagram to answer the following questions.

-Refer to Nirvana. Suppose a new drug, nirvana, were made illegal. We would expect:

• A) price to fall to P₁.
• B) price to increase to P₂.
• C) quantity to increase to Q₂.
• D) price will increase to P₃.

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Definitions:

Spot Rate

The ongoing market rate for buying or selling a particular currency, with immediate transfer.

Forward Rate

The agreed-upon exchange rate for currencies to be traded at a future date.

Amortize

This refers to the process of gradually writing off the initial cost of an asset over a period.

Discount

A reduction applied to the regular price of goods or services, or the amount by which the market value of a bond falls below its par value.