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Real interest rate and real cash flows do not include

This question belongs to Commerce Financial Management
Financial Management
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Real interest rate and real cash flows do not include

Answer & Solution
Correct Answer: Option C
Real interest rate and real cash flows do not include inflation effects. 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.
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