Suppose That Over the Past Year,the Real Interest Rate Was

question 117

Multiple Choice

Suppose that over the past year,the real interest rate was 5 percent and the inflation rate was 3 percent.It follows that

• A)the dollar value of savings increased at 5 percent,and the purchasing power of savings increased at 2 percent.
• B)the dollar value of savings increased at 5 percent,and the purchasing power of savings increased at 8 percent.
• C)the dollar value of savings increased at 8 percent,and the purchasing power of savings increased at 2 percent.
• D)the dollar value of savings increased at 8 percent,and the purchasing power of savings increased at 5 percent.

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Definitions:

Unit Product Cost

The cost assigned to a single unit of product, encompassing all the costs incurred to produce, manufacture, or acquire that unit.

Absorption Costing

A method in accounting that totals up all expenses of manufacturing including costs for direct materials, direct labor, along with variable and fixed overhead, assigning them to the cost of a product.

Unit Product Cost

The total cost to produce one unit of a product, including direct materials, direct labor, and manufacturing overhead.

Variable Costing

A costing method that includes only variable costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of a unit of product.