If the General Level of Prices Is Lower Than Business

question 99

Multiple Choice

If the general level of prices is lower than business decision makers anticipated when they entered into long-term contracts for raw materials and other resources, which of the following is most likely to occur?

• A) an economic boom
• B) highly attractive profit margins
• C) output less than the economy's long-run potential
• D) a sharp increase in imports

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Definitions:

Compounded Annually

Refers to the process of earning interest on both the initial principal and the accumulated interest from previous periods, calculated once per year.

Future Value

The estimated value of an investment or loan including interest or dividends, at a specific future date.

Ordinary Annuity

A series of matching financial discharges made at interval ends throughout a fixed term.

Compounded Monthly

The process of adding interest to the initial amount of a loan or deposit on a monthly basis, causing the total amount to grow at an increasing rate.