The Equilibrium Point Represents the Only Price-Quantity Combination in a Market

question 166

Multiple Choice

The equilibrium point represents the only price-quantity combination in a market that

• A)causes both buyers and sellers to agree to a price increase
• B)causes both buyers and sellers to agree to a price decrease
• C)exactly matches the independent plans of buyers and sellers
• D)allows buyers to purchase what they want
• E)allows sellers to earn a profit

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Definitions:

TIPS

Treasury Inflation-Protected Securities, which are U.S. government bonds that are indexed to inflation to protect investors from the negative effects of rising prices.

Coupon

The annual interest rate paid by a bond, expressed as a percentage of the face value, or the actual amount paid out to a bondholder annually.

Inflation

The rate at which there's an upward movement in the general price level of goods and services, weakening the purchasing capacity.

Convexity

A measure of the curvature or the degree of the curve in the relationship between bond prices and bond yields, indicating how the duration of a bond changes as the interest rate changes.