In August 1971,President Nixon Implemented Price and Wage Controls to Combat

question 3

Multiple Choice

In August 1971,President Nixon implemented price and wage controls to combat inflation.What best describes our experience with these price controls?

• A)Inflation remained about the same for many years.
• B)When the controls were implemented prices were decreasing,and within 3 years inflation increased dramatically and was about twice as high as it had been before the controls.
• C)Prices had increased rapidly before the controls were implemented,and they decreased rapidly in the years after the controls.

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Definitions:

Risk-Free Assets

Investments that are considered to carry no risk of financial loss, typically represented by government bonds or treasury bills.

Equity Investments

Investments in stocks or shares, representing ownership in a company or entity and participation in its profits.

Risk Free Rate

The rate of return on an investment with no risk of financial loss, typically represented by the yield on government bonds.

Market Premium

The additional return an investor expects to receive from a market portfolio compared to the risk-free rate.