An Inferior Good Has a ________ Income Elasticity of Demand

question 71

Multiple Choice

An inferior good has a ________ income elasticity of demand and quantity demanded ________ as income rises.

• A)negative; increases
• B)negative; decreases
• C)positive; increases
• D)positive; decreases

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Definitions:

Federal National Mortgage Association

A government-sponsored enterprise (GSE) known as Fannie Mae; it expands the secondary mortgage market by securitizing mortgages in the form of mortgage-backed securities.

U.S. Treasury

Refers to the federal government department responsible for managing government revenue and also to the securities (like bonds) it issues, considered low-risk investments.

Put Option

A financial contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a specified price within a specified time.

Underlying Asset

The financial asset upon which derivatives such as options and futures are based, determining their value.