An Increase in the Price Level Will

question 169

Multiple Choice

An increase in the price level will

• A)increase consumption because goods are more expensive
• B)make the consumption function steeper
• C)increase consumption because wages will increase
• D)decrease consumption because falling interest rates make it cheaper to borrow
• E)decrease consumption because the value of net wealth has decreased

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Definitions:

Bottom-Up Approach

A strategy that starts at the very detailed level and works upwards to form a complete picture, often used in analysis or planning.

Operating Cash Flow

Operating cash flow is the cash that comes from a company's usual business activities, showing if it can produce enough positive cash flow to sustain and expand its operations.

EBIT

Earnings Before Interest and Taxes, a measure of a firm's profit that includes all income and expenses except interest and income tax expenses.

Straight-Line Depreciation

A method of allocating the cost of a fixed asset evenly across its useful life.