When Looking at a Graph of Nominal and Real Interest

question 14

Multiple Choice

When looking at a graph of nominal and real interest rates you notice that nominal rates always lie above real rates.From this you conclude

• A)there were serious episodes of deflation in the time frame represented on the graph.
• B)consumer prices were always rising in the time frame represented on the graph.
• C)the economy never experienced a recession in the time frame represented on the graph.
• D)GDP was always increasing for the time frame represented on the graph.

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Definitions:

Production Level

The quantity of goods or services produced within a specified period by a company, factory, or manufacturing plant.

Direct Labor

The cost associated with workers who are directly involved in the production of goods or services.

GAAP

Generally Accepted Accounting Principles; a set of rules and standards used for financial reporting and accounting.

Cost Flow Assumption

An assumption about how costs are removed from inventory and reported as cost of goods sold, influencing how inventory and profits are accounted for.