What Happens Over Time to the Real Cost of Purchasing

question 53

Multiple Choice

What happens over time to the real cost of purchasing a home if the mortgage payments are fixed in nominal terms and inflation is in existence?

• A) The real cost is constant.
• B) The real cost is increasing.
• C) The real cost is decreasing.
• D) The price index must be known to answer this question.

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Definitions:

Operating Activities

Operating activities relate to the primary activities of a business involving the production and delivery of goods and services, and are reflected in the cash flows from operations in financial reporting.

Financing Activities

Transactions with creditors and investors used to fund a company through borrowing or selling equity.

Return on Assets

A financial ratio that indicates how profitable a company is relative to its total assets, measuring how efficiently assets are used to generate profit.

Net Income

The amount of money a corporation earns post all deductions for taxes and expenditures from its income.