Other Things Equal,in the Short Run a Lower Price Level

question 174

Multiple Choice

Other things equal,in the short run a lower price level leads households to

• A)increase consumption and firms to buy more capital goods.
• B)increase consumption and firms to buy fewer capital goods.
• C)decrease consumption and firms to buy more capital goods.
• D)decrease consumption and firms to buy fewer capital goods.

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Definitions:

Internal Rate

Refers to the internal rate of return (IRR), a financial metric used to estimate the profitability of potential investments.

Cash Flows

The entire sum of funds moving into and exiting a business, particularly impacting its liquidity and comprehensive financial well-being.

Payback Period

The length of time required to recover the cost of an investment, calculated by dividing the initial investment by the annual cash flow.

Cash Flows

The total amount of money being transferred into and out of a business, affecting the company's liquidity.