# High and unexpected inflation has a greater cost. True or False

true...................

## Related Questions

Dean Company has sales of \$166,000, and the break-even point in sales dollars is \$99,600. Determine the company's margin of safety percentage. Round answer to the nearest whole number.

The margin of safety for Dean Company is 40% as calculated below.

Explanation:

The margin of safety formula is given as:(Current level sales-Break-even sale)/current level sales

Current level salesis \$166,000

break-even sales is \$99600

Margin of safety=(\$166000-\$99600)/\$166000*100

Margin of safety=40%

This implies that sales level would have to fall by 40% before Dean Company records zero profit .

But if the sales level fall by more than 40% for the company to incur losses

A consumer is making purchases of products Alpha and Beta such that the marginal utility of product Alpha is 30 and the marginal utility of product Beta is 40. The price of product Alpha is \$5, and the price of product Beta is \$10. The utility-maximizing rule suggests that, to stay within a given budget constraint, this consumer should ________

Increase consumption of product Alpha and decrease consumption of product Beta.

Explanation:

Marginal utility refers to the extra utility a consumer gets from one additional unit of a specific product. In a short period of time, the marginal utility derived from successive units of a given product will decline. This is known as diminishing marginal utility.

The utility maximizing rule explain/show consumers decide to allocatetheir money so that the last dollarspent on each product purchasedyields the same amount of extra(marginal) utility.

As long as one good provide more utility per dollar than another, the consumer will buy more of the first good.

The utility-maximizing rule helps to explain the substitution effect and the income effect. When the price of an item declines, the consumer will no longer be in equilibrium until more of the item is purchased and the marginal utility of the item declines to match the decline in price. More of this item is purchased rather than another relatively more expensive substitution.

Which of the following statements is correct? A. The standardized budget and the actual budget differ because the latter does not take government transfer payments into account. B. The standardized budget is less likely to show a deficit than is the actual budget. C. The standardized budget and the actual budget will show the same size deficit or surplus in any given fiscal year. D. The standardized budget is more likely to show a deficit than is the actual budget.

B. The standard budget has less chances to show deficit than the deficit in actual budget.

Explanation:

Standard Budget is the budget prepared on standard norms, based on standard capacity, generally the company wants to reach this quantum in each respect of targets defined in budget.

Whereas, actual budget is not a budget it is report card of actual performance, therefore, if any deficit has to occur it will occur in actual budget, and not in standard budget.

Therefore correct statement is

B. The standard budget has less chances to show deficit than the deficit in actual budget.

Assume a country's nominal GDP is \$600 billion, government expenditures less debt service are \$145 billion, and revenue is \$160 billion. The nominal debt is \$360 billion. Inflation is 3 percent and interest rates are 6 percent. a. Calculate debt service payments.b. Calculate the nominal deficit or surplus. Add a negative sign before the value to indicate a deficit.c. Calculate the real deficit or surplus, placing a negative sign in front of the value if it is a deficit.

a). Debt service payments=\$21.6 billion

b). The nominal deficit=\$6.6 billion

c). The government has a real budget surplus of \$4.2 billion

Explanation:

a). Determine the debt service payments

The debt service payments can be expressed as;

Debt service payments=Nominal debt×interest rate

where;

nominal debt=\$360 billion

interest rate=6%=6/100=0.06

replacing;

Debt service payments=360×0.06=\$21.6 billion

Debt service payments=\$21.6 billion

b). Determine the nominal deficit or surplus

The nominal deficit can be expressed as;

nominal deficit/surplus=Revenue-(Interest on debt+Government expenditures)

where;

Government expenditures=\$145 billion

interest on debt=21.6 billion

revenues=\$160 billion

replacing;

nominal deficit/surplus=160-(145+21.6)=160-166.6=-\$6.6 billion

The nominal deficit=\$6.6 billion

c). Determine the real deficit or surplus

The real deficit/surplus can be expressed as;

real deficit=(inflation×total nominal debt)-nominal deficit

where;

nominal deficit=\$6.6 billion

inflation=3%=3/100=0.03

total nominal debt=\$360 billion

replacing;

real deficit/surplus=(0.03×360)-6.6=10.8-6.6=\$4.2 billion

The government has a real budget surplus of \$4.2 billion