Assume There Is a Price Ceiling Imposed on a Good

question 168

Multiple Choice

Assume there is a price ceiling imposed on a good which is below the equilibrium price. Which of the following changes would reduce the size of the surplus?

• A)​An increase in demand.
• B)​A decrease in demand.
• C)​An increase in supply.
• D)​None of the above; there is no surplus.

---

Definitions:

Price Level

An index reflecting the overall current prices for a wide range of goods and services within the economy, averaged out.

Exchange-Rate Effect

Refers to the impact of changes in the exchange rate on a country's export and import prices, and subsequently on its trade balance.

Aggregate-Demand Curve

A graphical representation showing the relationship between the total quantity of goods and services demanded (aggregate demand) and the overall price level, all else being equal.

Foreign Exchange Markets

Markets where currencies are traded, enabling businesses and individuals to convert one currency into another for various purposes including trade, investment, and tourism.