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Commerce · Q510

Financial Management

Graduate and Post Graduate · Commerce · question 510

Q510

Nominal interest rates and nominal cash flows are usually reflected the

A.
inflation effects
Answer
B.
opportunity effects
C.
equity effects
D.
debt effects

Answer: Option A

Solution

Answer: Option A
Solution:
Nominal interest rates and nominal cash flows are usually reflected the inflation effects. Inflation has the following effects on production activities: Inflation may or may not result in an increase in production. As long as the economy does not reach the full employment stage, inflation has a favorable effect on production. Usually, as the price level increases, profits increase too.