An Increase in the Expected Inflation Rate Will ________ the ________

question 102

Multiple Choice

An increase in the expected inflation rate will ________ the ________ for gold,________ its price,everything else held constant.

• A)increase;demand;increasing
• B)decrease;demand;decreasing
• C)increase;supply;increasing
• D)decrease;supply;increasing

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Definitions:

Substitution Effect

The economic principle that as the price of a good rises, consumers will replace it with cheaper alternatives, whereas if its price falls, the good will be favored over more expensive substitutes.

Total Effect

Refers to the entire impact or outcome resulting from a specific action or series of actions, considering all direct and indirect consequences.

Substitution Effect

The change in consumption that occurs when a price change moves the consumer along a given indifference curve to a point with a new tangent and slope.

Income Effect

The change in consumption resulting from a change in real income, with income changes arising from changes in prices, wages, or other factors.