The Assumption That Nothing Changes Except the Factor Being Studied

question 71

Multiple Choice

The assumption that nothing changes except the factor being studied is

• A) the ceteris paribus assumption.
• B) the rationality assumption.
• C) positive economic analysis.
• D) normative economic analysis.

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Definitions:

Speculative Demand

The demand for goods, services, or assets based not on their fundamental value but on the expectation that their price will increase in the future.

Precautionary Demand

The demand for liquid assets or money for the purpose of meeting unforeseen emergencies or taking advantage of unexpected opportunities.

Liquidity Trap

A situation where low interest rates fail to increase lending and economic growth due to people preferring to hold onto cash.

Demand Curve

A graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period, typically showing a downward slope from left to right.