The Effects of a Decline in the Value of Financial

question 13

Multiple Choice

The effects of a decline in the value of financial assets,such as stocks,on consumption and the economy might be offset by

• A)increasing government spending.
• B)decreasing the money supply.
• C)increasing taxes.
• D)undertaking no policy action.

---

Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, resulting in market balance.

Demand

The willingness and ability of consumers to purchase goods or services at a given price level.

Supply

The complete quantity of a product or service that can be bought at a particular price point.

Price Floor

A legally established minimum price for a good, or service. Normally set at a price above the equilibrium price.