The So-Called Ratchet Effect Refers to the Characteristic in the Economy

question 128

Multiple Choice

The so-called ratchet effect refers to the characteristic in the economy where product prices, wages, and per-unit production cost are flexible when

• A)AD decreases but not when AD increases.
• B)AD increases but not when AD decreases.
• C)AS increases but not when AS decreases.
• D)AD shifts but not when AS shifts.

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Definitions:

Times Interest Earned Ratio

A metric used to measure a company's ability to meet its debt obligations by comparing its interest expenses to its earnings before interest and taxes.

Debt

An amount of money borrowed by one party from another, under the condition that it is to be paid back at a later date, often with interest.

Investment

The action or process of investing money for profit or material result.

Coupon Rate

A bond's annual interest yield, represented as a percentage of its principal amount.