We Observe an Increase in the Price Level and a Decrease

question 71

Multiple Choice

We observe an increase in the price level and a decrease in real GDP.Which of the following is a possible explanation?

• A)an increase in the quantity of money
• B)an increase in expected future profits
• C)an increase in factor prices
• D)an increase in expected future income
• E)an increase in the quantity of capital

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Definitions:

Profitability Index

A financial metric used to measure the relative profitability of an investment, calculated as the present value of future cash flows divided by the initial investment.

Discount Rate

The discount rate utilized in determining the present value of future cash flows through discounted cash flow (DCF) analysis.

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment by calculating the present value of expected cash flows minus the initial cost.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows.