The Wealth Effect Is the Tendency for

question 115

Multiple Choice

The wealth effect is the tendency for

• A) changes in the price level to change nominal wealth and consumption.
• B) changes in the price level to change real wealth and consumption.
• C) household wealth to fluctuate with changes in the level of economic activity.
• D) the marginal propensity to rise with increases in wealth.

---

Definitions:

Retained Earnings

Retained earnings represent the accumulated net income of a company that has not been distributed to shareholders as dividends but is reinvested in the business.

FOH Volume Variance

A measurement in managerial accounting that compares the budgeted factory overhead for actual production volumes against the applied factory overhead based on standard costing.

FOH Budget Variance

The difference between the actual factory overhead costs incurred and the overhead costs allocated to production based on budgeted rates.

Fixed Manufacturing Overhead

Costs that do not change with the level of production, including salaries, rent, and insurance.