A price floor that is set below the equilibrium price
A) causes suppliers to lower their prices.
B) is binding.
C) is non-binding.
D) creates a shortage.
C
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According to the Lucas critique, if past increases in the short-term interest rate have always been temporary, then
A) the term-structure relationship using past data will then show only a weak effect of changes in the short-term interest rate on the long-term rate. B) the term-structure relationship using past data will show no effect of changes in the short-term interest rate on the long-term rate. C) one cannot predict the term-structure relationship as it depends on expectations. D) the term-structure relationship using past data will nevertheless show a strong effect of changes in the short-term interest rate on the long-term rate because of a change in the way expectations are formed.
A stock's price will fall if there is
A) a decrease in perceived risk. B) an increase in the required rate of return. C) an increase in the future sales price. D) current dividends are high.