If Demand Is Elastic,a Decrease in Quantity Will Cause the Total

question 39

Multiple Choice

If demand is elastic,a decrease in quantity will cause the total spending (P * Q) to

• A) rise.
• B) fall.
• C) remain unchanged.
• D) change in a way that cannot be determined.

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Definitions:

Modified Duration

A measure of the sensitivity of the price of a bond or a bond portfolio to a change in interest rates, adjusted for the possibility that the bond may be called before maturity.

Basis Point

A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument, equivalent to 0.01%.

Interest Rates

The fee, shown as a percentage of the principal amount, that a lender imposes on a borrower for the use of assets.

T-bill Rate

The yield on U.S. Treasury bills, a benchmark for short-term interest rates in the United States.