A Price Floor That Is Binding

question 11

Multiple Choice

A price floor that is binding:

• A) must be set above the equilibrium price, and will likely cause a shortage.
• B) must be set below the equilibrium price, and will likely cause a shortage.
• C) must be set above the equilibrium price, and will likely cause a surplus.
• D) must be set below the equilibrium price, and will likely cause a surplus.

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Definitions:

National Debt

The complete figure representing the debt a national government holds from borrowing, which is still outstanding.

Recessionary Gap

The difference between the actual level of GDP and the potential GDP that could be produced if all resources were fully employed, indicating an economy is not reaching its full output potential.

Fiscal Policy

Government decisions on taxation and spending to influence the economy, aiming to manipulate demand, inflation, and economic activity.

Monetary Policy

A central bank's management of money supply and interest rates to achieve macroeconomic objectives like controlling inflation, consumption, growth, and liquidity.