A Lesson from Hyperinflationary Periods Is That

question 34

Multiple Choice

A lesson from hyperinflationary periods is that:

• A) real GDP seems not to be affected.
• B) the price level rises but soon a period of decreasing prices ensues.
• C) the demand for real money balances decreases during periods of extreme instability.
• D) the demand for real money balances is always constant.

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Definitions:

Onerous Contracts

Contracts in which the unavoidable costs of meeting the obligations exceed the economic benefits expected to be received under it.

Accruals

Accounting method that records revenues and expenses when they are earned or incurred, regardless of when cash transactions occur, reflecting the economic activity more accurately.

Employee Benefits

All forms of consideration given by an entity in exchange for service rendered by employees or for the termination of employment.

Insurance Contracts

Contracts under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specific uncertain future event adversely affects the policyholder.