Which of the Following Claims Concerning the Importance of Effects

question 183

Multiple Choice

Which of the following claims concerning the importance of effects that explain the slope of the U.S.aggregate-demand curve is correct?

• A)The exchange-rate effect is relatively small because exports and imports are a small part of real GDP.
• B)The interest-rate effect is relatively small because investment spending is not very responsive to interest rate changes.
• C)The wealth effect is relatively large because money holdings are a significant portion of most households' wealth.
• D)None of the above is correct.

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Definitions:

Price Ceiling

Legislation or regulation that sets the maximum legal price a seller can charge for a product or service to prevent market prices from rising above a certain level.

Shortage

A situation in which the demand for a good or service exceeds its supply in a market.

Surplus

is an economic situation in which the quantity of a good supplied exceeds the quantity demanded at the current price, often leading to a decrease in prices.

Supply Determined

Refers to market situations where the quantity of products available in the market is primarily dictated by the supply side factors such as production capacity and inventory levels rather than by consumer demand.