Question

In the presence of inflation in the U.S., accountants incorrectly measure firms' earnings but the tax...

In the presence of inflation in the U.S., accountants incorrectly measure firms' earnings but the tax code correctly measures real incomes.

a. True
b. False

Which of the following did NOT happen during the late 19th century in the U.S.?

a.

Falling crop prices reduced farmers' incomes

b.

From 1880 to 1896, the price level fell by 23 percent

c.

Farmers lobbied for government policies to reduce inflation

d.

​Farmers had reduced ability to pay off debts

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Answer #1

a) True, what the accountant measure that is the income after inflation i.e. the value of that income will be eroded due to inflation. but tax will charge it at a higher income and higher rate further decreasing the real income.

b) "C"

Farmers lobbied for government policies to reduce inflation is wrong as the inflation was already all time low in that decade.

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