With the Policy Rate Set at Zero,the Rise in Expected

question 36

Multiple Choice

With the policy rate set at zero,the rise in expected inflation will lead to a ________ in the real interest rate,which will cause investment spending and aggregate output to ________.

• A)fall;rise
• B)fall;fall
• C)rise;rise
• D)rise;fall

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Definitions:

Equity Multiplier

A financial leverage ratio that measures the proportion of a company’s assets that are financed by its shareholders' equity, indicating the level of debt used to finance assets.

Net Profit Margin

A profitability ratio that shows what percentage of sales has turned into profits after all expenses are deducted.

Gross Margin

The difference between sales revenue and cost of goods sold, often expressed as a percentage, indicating the profitability of a company's core activities.

Times Interest Earned

A financial ratio that measures a company's ability to meet its interest payments based on its operating income.