If expected inflation is 12 percent and the publicly regulated electric utility company is legally limited...

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If expected inflation is 12 percent and the publicly regulated electric utility company is legally limited to a 10 percent ra

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Answer 1

Answer #1

Answer: (b) future power shortages.

As the rate of return is lower than expected inflation, so the real rate of return is negative. Thus, electric companies will decrease production, causing a shortage.

Thus, the correct option is (b).

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Answer 2

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