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.

---

Definitions:

Supreme Court

The highest judicial body in a country, responsible for interpreting the constitution and reviewing laws to ensure they comply with the constitution.

Guilty

A legal status describing someone who has been found responsible for committing a crime or wrongdoing.

OPEC

The Organization of the Petroleum Exporting Countries, a group of oil-producing nations that coordinate petroleum policies and prices internationally.

World's Oil

Refers to the global production, distribution, and consumption of crude oil as a key energy source.