When an Economy Is in a Recession

question 34

Multiple Choice

When an economy is in a recession,

• A) strong demand for investment funds will push interest rates upward.
• B) strong demand for resources will push the prices of resources upward.
• C) the real interest rate will tend to rise.
• D) the unemployment rate will rise above its natural rate.

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Definitions:

Deferred Taxes

Taxes owed that are not paid at the current time but are instead deferred to be paid in the future.

Net Cash Flow

The variation in cash earnings versus expenditures for a business during a certain period.

Debt Ratio

A financial ratio that measures the extent of a company's leverage, calculated by dividing total liabilities by total assets.

Equity Multiplier

A financial leverage ratio that measures the portion of a company's assets financed by its shareholders' equity.