If the Demand Curve Is Perfectly Elastic, Then an Increase

question 70

Multiple Choice

If the demand curve is perfectly elastic, then an increase in supply will:

• A)​increase both the price and the quantity exchanged.
• B)​increase the price but result in no change in the quantity exchanged.
• C)​increase the quantity exchanged but result in no change in the price.
• D)​decrease the price but result in no change in the quantity exchanged.

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Definitions:

Depository Institutions

Financial institutions that accept deposits from individuals and provide loans, such as banks and credit unions.

Loans

Sums of money borrowed that are expected to be paid back with interest by the borrower over a specified period of time.

Discount Rate

The interest rate charged by central banks on loans they give to commercial banks and other financial institutions.

Fed

The Federal Reserve System, which is the central banking system of the United States, responsible for monetary policy.