Suppose There Is a Decline in the Price Level

question 175

Multiple Choice

Suppose there is a decline in the price level. This means that

• A)the real wage decreases, and firms are willing to hire more people.
• B)the real wage is unaffected by the inflation rate.
• C)the real wage increases, and firms are willing to hire more people.
• D)the real wage decreases, and firms are willing to hire fewer people.
• E)the real wage increases, and firms are willing to hire fewer people.

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Definitions:

Recognition Principle

An accounting concept dictating that revenue should be recognized in the income statement when it is realized or realizable and earned, not necessarily when cash is received.

Time Period Principle

An accounting principle stating that financial reporting should be done in regular intervals to ensure relevance and reliability.

Contra Account

An account used in an accounting system to offset a related account, commonly used to record depreciation, allowances, and discounts.

Normal Balance

The side of an account, either debit or credit, where increases to the account are recorded.