If the Expected Inflation Rate Is 5% and the Actual

question 7

Multiple Choice

If the expected inflation rate is 5% and the actual inflation rate is 4%, then the unexpected inflation rate is:

• A)1%.
• B)9%.
• C)-1%.
• D)1.25%.

---

Definitions:

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditures to the appropriate periods.

Debt Investments

Financial investments in debt instruments, such as bonds or mortgages, where the investor lends money to a borrower in exchange for interest payments.

Unrealized Loss

A loss that results from holding onto an asset that has decreased in price, but has not actually been sold for a loss.

Available-For-Sale Securities

Financial assets that are intended to be sold in the short term, not held to maturity, and are recorded at fair market value.