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Discuss the Statement,"The Contingency Approach Is Just Common Sense

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Essay

Discuss the statement,"The contingency approach is just common sense." Is this ? Why or why not? Why is this important for managers?


Definitions:

Purchasing Power

The ability of an individual or group to buy goods or services with a given amount of money or currency.

Real Interest Rate

Represents the rate of interest an investor expects to receive after allowing for inflation.

Inflation

The pace at which prices for general goods and services ascend, thus diminishing the capability to purchase.

Real Interest Rate

The interest rate adjusted for the inflation rate, reflecting the real cost of borrowing and the real yield to lenders or investors.

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