Your Roommate Argues That He Can Think of No Better

question 261

Multiple Choice

Your roommate argues that he can think of no better situation than living in a deflationary economy,as prices of goods and services would continuously fall.You disagree and argue that during a deflation,people can be made worse off because

• A)the purchasing power of people's incomes would increase.
• B)the purchasing power of the currency would decrease.
• C)the value of the real interest rate will drop below the nominal interest rate.
• D)borrowers will have to pay increasing amounts in real terms over time.

---

Definitions:

Adult Population

The segment of the population that is of working age and eligible for employment, typically considered 18 years and older.

Discouraged Worker

An individual who is not actively looking for employment due to believing that no jobs are available for them.

Cyclical Unemployment

Unemployment that fluctuates with the business cycle, increasing during recessions and decreasing during expansions.

Unsuccessful Job Search

An unsuccessful job search refers to the situation where an individual actively looks for employment but fails to secure a job after a certain period.