The Real Purchasing Power of an Individual Will NOT Be

question 105

Multiple Choice

The real purchasing power of an individual will NOT be affected if

• A) money income doubles and the prices of all goods and services are cut in half.
• B) money income is cut in half and prices of all goods and services remain constant.
• C) money income is cut in half and the prices of all goods and services fall by fifty percent.
• D) money income doubles and the prices of all goods and services remain constant.
• E) money income falls and the price of one good falls.

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Definitions:

Contribution Margin Ratio

A profitability ratio that measures the percentage of sales revenue that exceeds variable costs, indicating how much contributes to fixed costs and profit.

Variable Cost Ratio

A measure of a company's variable costs as a percentage of sales, which shows the proportion of sales that is consumed by variable costs.

Profit-Volume Ratio

A measure that illustrates how profits will change with a change in volume, showing the relationship between profit and sales levels.

Mixed Cost

A cost that contains both variable and fixed cost elements, changing in total with the level of activity but having a portion that remains constant.