Starting from Long-Run Equilibrium, the Long-Run Impact(s)of an Increase in Autonomous

question 116

Multiple Choice

Starting from long-run equilibrium, the long-run impact(s) of an increase in autonomous consumption, compared to the original equilibrium, is:

• A)higher inflation and the same output.
• B)lower inflation and lower output.
• C)lower inflation and the same output.
• D)higher inflation and higher output.

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Definitions:

Effective-Interest Method

A way of calculating the amortized cost of a bond and the amount of interest expense over its life, reflecting the constant rate of interest over the period.

Bond Discount Amortization

The process of gradually writing off the discount on a bond over the life of the bond, reflecting the increase in its value as it nears maturity.

Carrying Value

The net amount at which an asset is valued on the balance sheet, taking into account depreciation, amortization, and impairment costs.

Effective-Interest Method

A method of amortizing the discount or premium on bonds payable over the life of the bonds, providing a periodic interest expense that reflects a constant rate of interest.