AICPA Exam CPA-Business 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?

AIncreasing interest rates.

BIncreasing the money supply.

CDecreasing interest rates.

DDecreasing the money supply.

Show Suggested 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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Lai

2 months 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

16 days ago

C) Decreasing interest rates.

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Ashley

23 days ago

B) Increasing the money supply.

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Noe

25 days ago

A) Increasing interest rates.

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Celeste

2 months ago

Increasing interest rates during deflation? That's like trying to put out a fire with gasoline!

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Sabrina

2 days ago

D) Decreasing the money supply.

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Jose

3 days ago

C) Decreasing interest rates.

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Sue

8 days ago

B) Increasing the money supply.

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Eugene

10 days ago

A) Increasing interest rates.

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Monroe

2 months ago

Wait, isn't decreasing the money supply the way to combat inflation? I'm so confused!

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Clorinda

1 months ago

B) Increasing the money supply.

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Irma

1 months ago

A) Increasing interest rates.

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Desmond

2 months ago

But wouldn't increasing interest rates discourage borrowing and spending, leading to deflation?

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Nan

2 months ago

I disagree, I believe the answer is B) Increasing the money supply.

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Beckie

2 months 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 months ago

No problem! It's important to understand the measures to prevent deflation.

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Raina

1 months ago

Oh, I see. Thanks for the clarification.

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Derrick

1 months ago

The correct action is increasing interest rates.

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Mi

2 months ago

Increasing the money supply is actually not the acknowledged preventive measure for deflation.

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Desmond

2 months ago

I think the answer is A) Increasing interest rates.

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Lizbeth

2 months 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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