Proper Inflation Accounting Is Necessary to Measure the Size of the Real

question 62

Multiple Choice

Proper inflation accounting is necessary to measure the size of the real deficit because

• A)as a lender, the government gains from inflation.
• B)otherwise, the deficit is understated in inflationary times.
• C)the government is a borrower that pays back dollars of less real value in inflationary times.
• D)interest payments tend to fall in inflationary times.

---

Definitions:

Downward-Sloping

Characteristic of a graph or curve that shows a decrease in one variable as another variable increases, commonly seen in demand curves.

Marginal Revenue

The extra revenue earned by selling an additional unit of a product or service.

Demand Curve

A graphical representation showing the relationship between the price of a good and the amount of it that consumers are willing and able to purchase at each possible price.

Marginal Revenue

The increase in total revenue that results from selling one additional unit of a product or service.