When the Rate of Inflation Rises, the Central Bank Should

question 44

Multiple Choice

When the rate of inflation rises, the central bank should

• A)raise the real rate of interest.
• B)raise the nominal rate of interest.
• C)lower the nominal rate of interest.
• D)increase aggregate expenditures.
• E)lower the real rate of interest.

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Definitions:

Post-Closing Trial Balance

A financial statement prepared after all adjusting and closing entries are made, serving to check the balance of debits and credits.

Adjusting Entries

Journal entries made at the end of an accounting period to update account balances to reflect accrued incomes and expenses for the period.

Owner's Equity

The residual interest in the assets of an entity after deducting liabilities, representing the owner's claim on the business resources.

Net Income

The conclusive financial gain of a company upon subtracting every expense and tax from its total sales revenue.