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How does dealer behavior make transaction prices hover around the equilibrium price?
- A. By quoting a higher bid and ask price when the inventory increases and a lower price when the inventory decreases.
- B. By quoting a lower bid and ask price when the inventory increases and a higher price when the inventory decreases.
- C. By quoting the same bid and ask price when the inventory increases and when the inventory decreases.
- D. By adjusting the volume of bid and ask quantities at which the dealer is willing to buy and sell.
the answer is b, but could someone explain why its b please?
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