Of the Following, Who Would Most Likely Be Hurt by an Unanticipated

question 25

Multiple Choice

Of the following, who would most likely be hurt by an unanticipated increase in the rate of inflation?

• A) an individual with a 30-year fixed-rate home mortgage loan
• B) the U.S. federal government because it has a large quantity of outstanding debt
• C) lenders who have made long-term loans at fixed interest rates
• D) Social Security recipients whose benefits are adjusted upward as the general level of prices increases

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Definitions:

Net Operating Income

The profit generated from a business's operations after subtracting operating expenses, but before interest and taxes.

Degree Of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to a change in its sales volume.

Variable Expenses

Expenses that change in proportion to the activity of a business, such as raw material costs or sales commissions.

Fixed Expenses

Expenses that remain constant regardless of production or sales volume, including rent, insurance, and salaries.