Which of the Following Statements Is Correct Under an Inflationary

question 1

Multiple Choice

Which of the following statements is correct under an inflationary economy?

• A) Generally you will pay less tax in real dollars if you have depreciable assets.
• B) Debt financing is always a preferred option because you are paying back with cheaper dollars.
• C) Government will collect less tax in short-run, but end up collecting more in the long-run.
• D) Actual dollar analysis is always preferred whereas the effects of income taxes must be considered.

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Definitions:

Asset Account

An account on a balance sheet that represents a resource with economic value owned or controlled by an individual or business.

Liability Account

An account noted on the balance sheet that represents debts or obligations that a company owes to others and must settle over time.

Posting Reference Column

A ledger column used to indicate the account number or code that corresponds to each entry, facilitating cross-referencing between ledgers.

Journal

A book or digital record where transactions are initially recorded before they are posted to ledgers.