If Consumers Believe That Next Year a Recession Will Occur

question 45

Multiple Choice

If consumers believe that next year a recession will occur (in a closed economy) ,then the real interest rate ________ and investment ________.

• A)falls; declines
• B)falls; increases
• C)rises; increases
• D)rises; declines

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Definitions:

Pensions

Retirement plans funded either by employers or governments, providing income to individuals upon retirement.

GAAP

Generally Accepted Accounting Principles; the standard framework of guidelines for financial accounting used in any given jurisdiction, particularly in the United States.

Projected Benefit Obligation

The present value of estimated future payments required to settle the obligations of a pension plan over its employees' expected future service.

Plan Assets

Assets that are held by a retirement plan from which the benefits to the participants are to be paid.