Suppose Demand Decreases, but There Is No Change in Supply

question 177

Multiple Choice

Suppose demand decreases, but there is no change in supply. As the market reaches its new equilibrium:

• A)excess demand will lead the price to rise.
• B)excess supply will lead the price to rise.
• C)excess demand will lead the price to fall.
• D)excess supply will lead the price to fall.

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Definitions:

Current Yield

A bond's annual interest payment divided by its current price, indicating the return an investor would expect if the bond is held for a year.

Premium Bonds

Government or corporate bonds that are sold at a price above their face value due to their high credit quality or favorable interest yield.

Discount Bonds

Bonds sold for less than their face value, offering investors the difference as profit upon maturity.