The Expectation of Greater Inflation Resulting from the Government's Creation

question 26

Multiple Choice

The expectation of greater inflation resulting from the government's creation of money to finance budget deficits often results in a:

• A)higher nominal demand for goods.
• B)lower money velocity.
• C)less inflationary pressure.
• D)less rapid money growth.

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Definitions:

Straight-Line Depreciation

A technique for segmenting the cost of a material asset over its life in even annual segments.

After-Tax Discount Rate

The discount rate used in financial calculations that reflects the net cost of capital after accounting for the effects of taxes.

Discount Factor

A factor by which a future cash flow is multiplied to obtain its present value.

After-Tax Discount Rate

The interest rate used in discounted cash flow analysis to calculate the present value of future cash flows after accounting for taxes.