If the Economy Unexpectedly Went from Inflation to Deflation

question 31

Multiple Choice

If the economy unexpectedly went from inflation to deflation,

• A)both debtors and creditors would have reduced real wealth.
• B)both debtors and creditors would have increased real wealth.
• C)debtors would gain at the expense of creditors.
• D)creditors would gain at the expense of debtors.

---

Definitions:

Inventory System

A method or software used by businesses to track stock levels, orders, sales, and deliveries to efficiently manage their inventory.

Average Cost

A calculation that determines the total cost of goods available for sale divided by the total units available for sale, providing a mean cost per unit.

Cost Flow Assumption

An accounting method used to determine the value of unsold inventory and cost of goods sold, examples include FIFO, LIFO, and average cost.

Perpetual Inventory System

An accounting method where records of inventory are updated on a continuous basis as goods are sold or received.