Suppose an Economy Has Some Inflation

question 256

Multiple Choice

Suppose an economy has some inflation. Then, after a base year, the value of real GDP will

• A) be greater than nominal GDP.
• B) will be approximately half the value of nominal GDP.
• C) not be different from nominal GDP.
• D) be less than nominal GDP.

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Definitions:

Contribution Margin Ratio

The percentage of each sales dollar that remains after variable costs are subtracted, indicating the portion contributing to covering fixed costs and generating profit.

Fixed Monthly Expenses

Recurring costs that do not vary in amount and are paid on a monthly basis, such as rent or loan payments.

Net Operating Income

Earnings from a company's core business operations, excluding deductions for interest and taxes.

Margin Of Safety

The excess of budgeted or actual dollar sales over the break-even dollar sales.