Which of These Statements Is True

question 74

Multiple Choice

Which of these statements is true?

• A)The higher the default risk, the higher the interest rate that security buyers will demand.
• B)The lower the default risk, the higher the interest rate that security buyers will demand.
• C)The higher the default risk, the lower the interest rate that security buyers will demand.
• D)The default risk does not impact the interest rate that security buyers will demand.

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Definitions:

Income Effect

A change in the quantity demanded of a product that results from the change in real income (purchasing power) caused by a change in the product’s price.

Wage Rate

The amount of compensation offered to an employee per unit of time (e.g., hourly, daily) or piece of work done.

Purely Competitive

Purely competitive markets are characterized by many buyers and sellers, homogeneous products, and the absence of barriers to entry or exit, leading to firms being price takers.

Imperfectly Competitive

Refers to market structures that do not meet the conditions of perfect competition, often characterized by a small number of sellers, product differentiation, or barriers to entry.