When Inflation Increases Over the Long Run (Several Years)

question 67

Multiple Choice

When inflation increases over the long run (several years) ,

• A)consumption will increase at a faster rate in real dollars.
• B)interest rates will move up with inflation.
• C)real GDP growth will stabilize at the rate of inflation plus 3% real growth.
• D)the dollar will usually rise relative to currencies of countries where inflation is growing at a slower rate.

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Definitions:

Net Cash Flow

The difference between a company's cash inflows and outflows within a specified period.

Investing Activities

Financial transactions related to the acquisition or disposal of long-term assets and investments, considered part of the cash flow statement.

Equipment Purchase

The acquisition of machinery or office equipment, usually classified as a capital expense, to be used in the operations of a business.

Land Purchase

An acquisition of real estate property involving a one-time payment or installment payments, considered a long-term asset on the balance sheet.