Inflation

question 6

Multiple Choice

Inflation

• A) increases the real value of the debt.
• B) has no impact on the debt.
• C) decreases the real value of the debt.
• D) is always factored into any calculations of deficits or surpluses.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds; interest expense is often deductible for the borrower for tax purposes.

Inflation

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

Stockholders' Equity/Total Assets

A ratio expressing the proportion of a company's assets that are financed by shareholders' equity.

Long-Term Debt/Stockholders' Equity

A financial ratio that measures a company's leverage by comparing its long-term debt to its stockholders' equity.