If the price of a natural resource is expected to rise at a rate that exceeds the interest rate,demand ________ and supply ________.

Question

Quizplus · Accepted Answer

When the price of a natural resource is expected to rise at a rate that exceeds the interest rate, it becomes profitable to hold on to the resource rather than selling it immediately. This leads to an increase in demand as buyers try to stock up before the price rises further. At the same time, producers may hold back supply in anticipation of higher prices in the future. This leads to a decrease in supply. Therefore, the correct answer is B: demand increases and supply decreases.

If the Price of a Natural Resource Is Expected to Rise