Deflation

question 155

Multiple Choice

Deflation

• A) automatically implies that,on average,everyone is better off because prices have fallen.
• B) is the same as disinflation; it means the rate of inflation has fallen.
• C) will make you better off if your nominal wages fall more slowly than prices.
• D) will make you better off if your nominal wages fall more rapidly than prices.
• E) will make you better off if your real wages fall more rapidly than prices.

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Definitions:

Competitive

Characterized by the existence of competition; striving to gain or win something by defeating or establishing superiority over others.

Compounded Continuously

The mathematical limit that investment interest can grow to when it is compounded infinitesimally.

Borrowing Money

The act of obtaining funds from another party, often a financial institution, under the agreement to pay back with interest.

Nominal Rate

The interest rate stated on a loan or investment agreement, not taking into account the effects of inflation, and often differing from the real rate of interest.