All of the following are problems caused by deflation except
A. Borrowers face an increased burden of debt
B. The real interest rate becomes higher than the nominal interest rate
C. Firms make higher profits as consumers buy more goods and services
D. Consumers postpone purchases in the hope of lower prices in the future
Answer: C. Firms make higher profits as consumers buy more goods and services
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If the liquidity effect is smaller than the other effects, and the adjustment to expected inflation is slow, then the
A) interest rate will fall. B) interest rate will rise. C) interest rate will initially fall but eventually climb above the initial level in response to an increase in money growth. D) interest rate will initially rise but eventually fall below the initial level in response to an increase in money growth.
Which of the following is true concerning cost curves?
a. TC + TFC = TVC b. AFC + AVC = ATC c. MC + AVC = TVC d. TC – MC = TFC e. ATC + MC = TC