Assume You Have $5,000 in a Savings Account at the Beginning

question 37

Multiple Choice

Assume you have $5,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 125 at the end of the year,the real value of your savings is closest to

• A)$4,000.
• B)$4,875.
• C)$5,125.
• D)$6,250.

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Definitions:

Explicit Costs

Direct, out-of-pocket payments for wages, rent, and materials, among others, involved in the production of goods or services.

Opportunity Costs

The cost of forgoing the next best alternative when making a decision or choice.

Implicit Costs

Indirect, non-out-of-pocket expenses which represent the opportunity costs of using resources owned by the firm for its operations.

Accounting Profit

The difference between total revenue and explicit costs.