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

question 79

Multiple Choice

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

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

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Definitions:

Straight-Line Depreciation

A way of distributing the financial burden of a tangible asset over its lifespan in equal yearly portions.

Initial Investments

The initial amount of money invested in a project or business to cover startup costs or to purchase fixed assets.

Income Taxes

Income taxes are taxes levied by governments on individuals and corporations based on their net income or profit within a financial year.

After-Tax Discount Rate

A rate that adjusts for taxes when evaluating the present value of future cash flows.