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AICPA CPA-Business Exam - Topic 1 Question 100 Discussion

Which of the following actions is the acknowledged preventive measure for a period of deflation?
A) Increasing interest rates.
B) Increasing the money supply.
C) Decreasing interest rates.
D) Decreasing the money supply.

AICPA CPA-Business Exam - Topic 1 Question 100 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 100
Topic #: 1
[All CPA-Business Questions]

Which of the following actions is the acknowledged preventive measure for a period of deflation?

Show Suggested Answer Hide Answer
Suggested Answer: A

Choice 'a' is correct. As the cost of carrying inventory decreases, safety stock would tend to increase to reduce the risk of stock outs.

Choice 'b' is incorrect. As sales become more predictable (sales variability decreases), less (not more) safety stock would be needed because the risk of stock outs would have decreased.

Choice 'c' is incorrect. If the cost of stock outs decrease, safety stock would decrease.

Choice 'd' is incorrect. If lead-time decreases, safety stock would decrease.


by Kristeen at Sep 18, 2024, 07:39 PM

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Blythe
7 months ago
I thought decreasing the money supply was a thing?
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Elise
8 months ago
Decreasing interest rates helps too, but B is better.
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Georgeanna
8 months ago
Wait, are we sure about that? Sounds off.
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Allene
8 months ago
Totally agree, B is the right answer!
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Claribel
8 months ago
Increasing the money supply is key during deflation.
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Franchesca
9 months ago
I’m leaning towards option B, but I also remember something about how decreasing interest rates can help too. It's a bit confusing!
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Delisa
9 months ago
I feel like increasing interest rates would actually make deflation worse, but I can't recall the exact reasoning behind it.
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Eulah
9 months ago
I remember practicing a question like this, and I think decreasing interest rates is often recommended to stimulate spending.
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Bulah
9 months ago
I think increasing the money supply is usually the right move during deflation, but I'm not completely sure.
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Bea
9 months ago
I've got this one! The textbook says the acknowledged preventive measure for deflation is increasing the money supply. So the answer is B. Feeling confident about this one.
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Aretha
9 months ago
I'm a bit confused on this one. Is it C, decreasing interest rates? Or is that for inflation? Ugh, I need to review my notes on monetary policy again before the exam.
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An
9 months ago
Hmm, I'm a little unsure about this one. I know deflation is the opposite of inflation, but I can't remember the textbook solution off the top of my head. I'll have to think this through carefully.
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Lucy
9 months ago
This one seems pretty straightforward. I'm pretty sure the answer is B - increasing the money supply to combat deflation.
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Marleen
9 months ago
Okay, let me think this through step-by-step. Deflation means prices are falling, so the central bank would want to increase the money supply to stimulate the economy. I believe the correct answer is B.
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Lai
1 year ago
I've got a better idea - how about we just print more money and call it a day? What could go wrong?
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Noble
1 year ago
C) Decreasing interest rates.
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Ashley
1 year ago
B) Increasing the money supply.
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Noe
1 year ago
A) Increasing interest rates.
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Celeste
1 year ago
Increasing interest rates during deflation? That's like trying to put out a fire with gasoline!
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Sabrina
1 year ago
D) Decreasing the money supply.
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Jose
1 year ago
C) Decreasing interest rates.
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Sue
1 year ago
B) Increasing the money supply.
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Eugene
1 year ago
A) Increasing interest rates.
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Monroe
1 year ago
Wait, isn't decreasing the money supply the way to combat inflation? I'm so confused!
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Clorinda
1 year ago
B) Increasing the money supply.
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Irma
1 year ago
A) Increasing interest rates.
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Desmond
1 year ago
But wouldn't increasing interest rates discourage borrowing and spending, leading to deflation?
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Nan
1 year ago
I disagree, I believe the answer is B) Increasing the money supply.
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Beckie
1 year ago
Increasing the money supply? Sounds like the right move to me. I'll have to remember that one.
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Lai
1 year ago
No problem! It's important to understand the measures to prevent deflation.
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Raina
1 year ago
Oh, I see. Thanks for the clarification.
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Derrick
1 year ago
The correct action is increasing interest rates.
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Mi
1 year ago
Increasing the money supply is actually not the acknowledged preventive measure for deflation.
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Desmond
1 year ago
I think the answer is A) Increasing interest rates.
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Lizbeth
1 year ago
Hmm, I thought decreasing interest rates was the way to go during deflation. I hope I don't get this one wrong on the exam!
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