"As the Price of Personal Computers Continues to Fall, Demand

question 80

Multiple Choice

"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because:

• A)a change in the price of personal computers shifts the demand curve.
• B)a change in the price of personal computers shifts the supply curve.
• C)the statement is backwards: increased demand leads to lower prices.
• D)a falling price of personal computers increases the quantity demanded, not demand.

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Definitions:

Amortized Cost Basis

An accounting method that gradually writes off the initial cost of an asset over a period, which reflects its consumption or use over time.

Credit Loss

Credit Loss is the loss incurred by a lender when a borrower fails to repay a loan, and the recoverable amount is less than the outstanding balance.

Effective Interest Rate

The real cost of borrowing, taking into account the effects of compounding interest.

Debt Security

A financial instrument representing a loan made by an investor to a borrower, typically corporate or governmental, where the borrower is obligated to pay back with interest.