In General,if a Consumer Good Is Produced Domestically and Consumed

question 126

Multiple Choice

In general,if a consumer good is produced domestically and consumed domestically,a decrease in its price will have which of the following effects?

• A)The consumer price index will decrease relatively more than will the GDP deflator.
• B)The consumer price index and the GDP deflator will decrease by the same amount.
• C)The consumer price index will decrease relatively less than will the GDP deflator.
• D)One cannot generalize about the decrease in the consumer price index relative to the decrease in the GDP deflator.

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Definitions:

IRR (Internal Rate of Return)

A financial metric used to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Discount Rate

The interest rate charged to commercial banks and other financial institutions for loans received from the central bank's discount window.

High-risk Projects

High-risk projects are those that come with a greater uncertainty regarding outcomes, potentially offering higher returns alongside increased potential for loss.

Low-risk Proposals

Refers to proposals or projects with a minimal chance of failure or loss, often associated with stable returns.