Deflation Generally Occurs When Which of the Following Occurs

question 34

Multiple Choice

Deflation generally occurs when which of the following occurs?

• A) Real GDP does not change.
• B) The consumer price index decreases.
• C) Nominal GDP does not change.
• D) The consumer price index is greater than the GDP deflator.
• E) The rate of inflation falls, for example, from 4% to 3%.

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Definitions:

Salvage Value

The appraisal of an asset’s market price at the exhaustion of its operational time.

Depreciation Rates

The percentage at which an asset's value is reduced to account for wear and tear over its useful life.

Units-of-activity Method

A depreciation method that allocates the cost of an asset over its useful life based on units of production or use, rather than passage of time.

Straight-line Method

A method of calculating depreciation by evenly allocating the cost of an asset over its estimated useful life.