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.

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Definitions:

Rate Of Return

Earnings or losses experienced by an investment within a chosen period, measured as a percentage of the investment’s purchase cost.

Heirs

Individuals legally entitled to inherit a deceased person's assets.

Rate Of Return

Fluctuations in the value of an investment during a pre-defined period, calculated as a percentage of the investment’s commencement cost.

Start Saving

The practice of setting aside a portion of current income for future use, aimed at building financial security.