Suppose There Is a Reduction in Cash Flow

question 49

Multiple Choice

Suppose there is a reduction in cash flow.This suggests that

• A)firms have decreased their expectations of future profits.
• B)the real interest rate has increased.
• C)the rate of depreciation has increased.
• D)current profits have decreased.
• E) all of the above

---

Definitions:

Inflation Rate

The speed at which the overall price level of goods and services increases, leading to a decline in purchasing power.

Compounded Quarterly

A method in which interest is added to the principal sum of a deposit or loan every three months, leading to interest on interest.

Compounded Monthly

Interest on an investment or loan that is calculated and added to the principal balance once a month, leading to faster growth.

Semi-Annually Compounded

A rephrasing of "compounded semi-annually," where interest is calculated twice a year on the initial principal and previously accumulated interest.