Deflation compounds information problems because it:
A. increases a company's net worth.
B. always harms lenders.
C. tends to understate a company's assets and overstate their liabilities.
D. reduces the dollar value of assets while the dollar value of liabilities stays constant.
Answer: D
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A perfectly competitive industry achieves allocative efficiency because
A) goods and services are produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it. B) firms carry production surpluses. C) it produces where market price equals marginal production cost. D) goods and services are produced at the lowest possible cost.
The successor organization to GATT, created in 1995, is the
A) WTO. B) EU. C) NAFTA. D) FDIC.
If the Fed buys government securities from the non-bank public, then
A) reserves at banks decrease. B) deposits at banks increase and banks' reserves increase. C) deposits at banks increase and banks' reserves decrease. D) loans at banks decrease. E) deposits at banks decrease and banks' reserves increase.
The equation of exchange states that the quantity of money
A) multiplied by the velocity of circulation equals nominal GDP. B) divided by price level equals real GDP. C) multiplied by nominal GDP equals the price level. D) divided by nominal GDP equals real GDP.