A Rising Price Level in the Short Run May Create

question 186

Multiple Choice

A rising price level in the short run may create an incentive for firms to increase production because

• A)costs of production will increase
• B)total sales revenue will decrease
• C)profits will increase
• D)costs of production will increase faster than total revenue
• E)output prices are generally not fixed by contract whereas resource prices are

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Definitions:

Subprime Mortgages

Loans offered to individuals with poor credit scores at higher interest rates than conventional mortgages, contributing to the 2008 financial crisis.

Speculative Frenzy

A period marked by widespread excitement or irrational behavior among investors, leading to significant asset price volatility.

Federal Reserve Bank

The central banking system of the United States, established in 1913, which aims to provide the nation with a safer, more flexible, and stable monetary and financial system.

Economic Speculation

The practice of engaging in risky financial transactions in an attempt to profit from short or medium-term fluctuations in the market value of a tradable financial instrument.