When Unemployment Is Above Its Natural Rate, the Inflation Rate

question 179

Multiple Choice

When unemployment is above its natural rate, the inflation rate will eventually

• A)increase.
• B)decrease.
• C)move to its natural rate.
• D)become equal to the natural rate of unemployment.
• E)accelerate toward hyperinflation.

---

Definitions:

Prepaid Expense

Expenses paid in advance for goods or services to be received in the future, recorded as assets on the balance sheet until they are actually consumed.

Insurance Expense

The cost recognized in the accounting period related to the premiums paid for insurance policies.

Retained Earnings

Profits that a company keeps after dividends are paid to shareholders, used for reinvestment in the business or to pay off debt.

Closing Entry

A closing entry is an accounting procedure used at the end of an accounting period to transfer the balances from temporary accounts to permanent ones, thus preparing the accounts for the next period.