Other Things Equal, Which of the Following Is True

question 32

Multiple Choice

Other things equal, which of the following is true?

• A) A reduction in prices will increase the real wealth of those holding a fixed quantity of money.
• B) A reduction in prices will lead to a decline in net exports.
• C) A reduction in prices will increase the scarcity of money, raise the real interest rate, and, thereby, encourage investment and consumption.
• D) A reduction in prices will increase profit margins and, thereby, stimulate additional investment.

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Definitions:

Government

The governing body of a nation, state, or community which makes and enforces laws, policies, and regulations.

Interest Payments

The amount paid by a borrower to a lender as a charge for the use of borrowed money, typically expressed as an annual percentage of the principal.

National Debt

The total amount of money that a country's government has borrowed, typically as a result of budget deficits, and is yet to repay.

Progressive

Referring to a tax system in which the tax rate increases as the taxable amount increases, often aimed at reducing income inequality.