According to the Real Balances Effect,when the Price Level

question 7

Multiple Choice

According to the real balances effect,when the price level:

• A) Falls,cash is worth less and therefore people buy less.
• B) Falls,cash is worth more and therefore people buy more.
• C) Rises,cash is worth less and therefore people buy more.
• D) Rises,cash is worth more and therefore people buy less.

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Definitions:

Fundamental Analysis

Assessment of firm value that focuses on earnings and dividends prospects, expectations for future interest rates, and risk evaluation.

Earnings

The amount of money that a company makes during a specific period, usually defined as profit after all expenses have been subtracted from revenue.

Dividends

Payments made by a corporation to its shareholder members, typically a portion of the earnings decided by the board of directors.

Asset Turnover Ratio

A financial metric that measures the efficiency of a company in generating sales revenue from its assets.