Which of the Following Explains Why an Economy That Has

question 96

Multiple Choice

Which of the following explains why an economy that has moved away from long-run equilibrium due to a fall in aggregate demand should avoid deflation?

• A) Deflation causes a rightward shift in the short-run aggregate supply curve.
• B) Deflation is usually accompanied by an increase in employment.
• C) Encouraged by lower prices, households increase the demand for goods and services.
• D) Consumers often postpone consumption in the expectation that prices will fall further.

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Definitions:

Goodwill

An intangible asset that represents the excess of the purchase price over the fair market value of an acquired company's net assets, attributed to factors like reputation or customer loyalty.

Impairment

A decrease in the recoverable value of an asset below its carrying amount, leading to a write-down and charge against earnings.

Consolidating

The process of combining financial statements from multiple departments or subsidiaries within a company to create a single set of financial statements.

Equity Method

A procedure for accounting for ownership interests, where the investment's carrying amount is adjusted for the investor's proportionate share of the associate company's profits or losses over time.