Which of the Following Is True of Expected Inflation

question 90

Multiple Choice

Which of the following is true of expected inflation?

• A)It increases the efficiency of the economy.
• B)It is more of a problem than unexpected inflation.
• C)It results in lower prices over time as people make adjustments.
• D)It is not a major problem if people can make the right interest rate and income level adjustments.
• E)It is necessarily tied to a decline in purchasing power.

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Definitions:

Accounting Rate of Return

A financial ratio used to estimate the profitability of an investment, calculated as average annual profit divided by initial investment cost.

Accrual Accounting

An accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.

Hurdle Rate

The minimum rate of return on a project or investment required by a manager or investor.

Weighted Average Cost

A method of calculating the total cost of goods available for sale, considering the weighted average of all goods.