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When the Government Imposes a Binding Price Ceiling on a Competitive

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When the government imposes a binding price ceiling on a competitive market, a surplus of the good arises, and sellers must ration the scarce goods among the large number of potential buyers.


Definitions:

Federal Reserve System

The central banking system of the United States, responsible for monetary policy, regulating banks, and ensuring financial system stability.

Securities and Exchange Commission

A U.S. federal agency responsible for enforcing the laws governing the securities industry, and regulating the securities markets and investment companies.

Rate of Return

The advancement or decline in an investment's value over a predetermined interval, calculated as a percentage of the investment's initial expenditure.

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