When the Inflation Rate Increases, PAE ______, Which in Turn

question 17

Multiple Choice

When the inflation rate increases, PAE ______, which in turn causes Y to ______ because of ______.

• A)falls; fall; the income-expenditure multiplier
• B)falls; rise; the income-expenditure multiplier
• C)rises; rise; the wealth effect
• D)rises; fall; the wealth effect

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Definitions:

Unlimited Liability

A legal obligation where the owners or partners of a business are personally responsible for all the debts of the business, without any limits on the amount for which they can be liable.

Transfer Ownership

The process of legally moving the rights and responsibilities of an asset or property from one entity or individual to another.

Corporate Shareholders

Individuals or entities that legally own one or more shares of stock in a public or private corporation, granting them rights to dividends and a vote in company matters.

Liability

A cost when a corporate’s responsibility has not been met.