(Consider This) the Ratchet Effect Is the Tendency of

question 29

Multiple Choice

(Consider This) The ratchet effect is the tendency of

• A)the price level to increase but not to decrease.
• B)nominal GDP to increase more rapidly than real GDP.
• C)real interest rates to fall more rapidly than nominal interest rates.
• D)consumption to rise year after year regardless of what happens to disposable income.

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Definitions:

Withholding Allowances

A specified number on an employee's W-4 form that reduces the amount of money withheld from their paycheck for taxes.

Semimonthly Payroll

A payroll schedule where employees receive their wages twice a month, often on predetermined dates.

Marital Status

A legal term that identifies an individual's formal relationship status, such as single, married, divorced, or widowed.

Underpayment Penalties

Penalties charged by tax authorities for paying less tax than is owed, often calculated based on the amount of underpayment and the time period it spans.