An effective price ceiling usually generates
A) fire sales as firms try to unload their excess inventories.
B) higher nominal prices.
C) the use of nonprice rationing devices.
D) happy sellers and dissatisfied buyers.
Answer: C
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The classical model's theory of the interest rate does not apply in the short run
a. True b. False
If a point lies on the monetary policy reaction curve, and at this point the inflation rate equals the target rate of inflation, we know that:
A. the real interest rate corresponding to this point is below the long-run real interest rate. B. current output is above potential output. C. the real interest rate corresponding to this point is equal to the long-run real interest rate. D. the real interest rate corresponding to this point is above the long-run real interest rate.