When Inflation Occurs

question 40

Multiple Choice

When inflation occurs:

• A) All prices are rising
• B) Each dollar of income will buy more output than before
• C) The purchasing power of money increases
• D) The purchasing power of money decreases

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Definitions:

Useful Life

The estimated period over which an asset is expected to be usable by a company for its intended purpose.

Capitalize

To record a cost or expense on the balance sheet for the purposes of delaying full recognition of the expense over time through depreciation or amortization.

Expense Account

An account used to track expenditures associated with business operations, often related to employee travel or business activities.

Asset Account

An account recorded on the balance sheet that represents items of value owned by a company, such as cash, inventory, buildings, and equipment.