In the context of economic theory, the 'Law of Demand' is derived from:
A. Only the income effect
B. Both substitution and income effects for normal goods
C. Increasing marginal utility
D. Only the substitution effect
Answer: Option B
Solution (By JKSSB Mock Tests)
For normal goods, both the substitution effect and the income effect of a price change work in the same direction, reinforcing the inverse relationship between price and quantity demanded.
Explanation:
In a corridor system the central bank’s overnight lending rate and deposit rate form a corridor within which the interbank rate fluctuates; open-market operations keep the market rate near the centre of the corridor.
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