To Ensure That a Nominal Payment Represents a Constant Level

question 86

Multiple Choice

To ensure that a nominal payment represents a constant level of purchasing power over time, one should:

• A)add the price index to it.
• B)subtract the price index from it.
• C)divide it by the price index.
• D)increase it by a percentage equal to the rate of inflation for that year.

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Definitions:

Theories

Systematic, organized frameworks of concepts and principles designed to explain and predict phenomena.

Hypotheses

Plural of hypothesis; propositions made as a basis for reasoning, without any assumption of its truth, intended for further investigation or experiment.

Reverse Causality

A situation where the presumed effect influences the cause, complicating the understanding of the relationship between variables.

Correlation

A statistical measure that indicates the extent to which two or more variables fluctuate together.