Which of the Following Is True About Inflation

question 42

Multiple Choice

Which of the following is true about inflation?

• A) Inflation is an indicator of the decrease in the value of money.
• B) During periods of low inflation,businesses that seek to increase their profit margins can do so by increasing their prices significantly.
• C) Inflation is a period of economic activity characterized by negative growth.
• D) Inflation occurs when the gross domestic product falls for two consecutive quarters.

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Definitions:

Contract Rate

The agreed-upon rate or price specified in a contract for the provision of goods or services.

Effective Rate

The actual interest rate realized on an investment, taking into account the effect of compounding over a given time period.

Bond Premium

The surplus value of a bond beyond its principal amount when sold in the market.

Term Bond

Bonds that have a specified maturity date on which the principal or face value is payable to bondholders.