When There Is Deflation

question 44

Multiple Choice

When there is deflation,

• A)the real interest rate rises.
• B)it has no effect on the output gap.
• C)it has no effect on the unemployment rate.
• D)there is decline in real money.
• E)nominal interest rates are negative.

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Definitions:

Gold Reserves

The quantity of gold held by a national central bank or government intended to serve as a store of value and as a guarantee to redeem promises to pay depositors, note holders, or trading peers.

International Monetary Fund

An international organization that aims to foster global monetary cooperation, secure financial stability, and facilitate international trade.

Special Reserves

Funds or assets set aside for specific, often unforeseen, needs or requirements.

Floating Exchange Rates

A currency valuation system that allows the value of a currency to fluctuate according to the foreign exchange market.