If You Get an 8 Per Cent Increase in Your

question 58

Multiple Choice

If you get an 8 per cent increase in your nominal income, your real income

• A) definitely increases.
• B) increases if the inflation rate is more than or equal to 8 per cent.
• C) increases only if the inflation rate is more than 8 per cent.
• D) increases only if the inflation rate is less than 8 per cent.
• E) increases only if the inflation rate is equal to 8 per cent.

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Definitions:

Incremental Analysis

The process of identifying the financial data that changes under alternative courses of action.

Fixed Overhead

Regular, ongoing costs that are not affected by the level of production or sales, such as rent, salaries, and insurance.

Direct Materials

Raw materials directly used in the manufacturing of a product, which are easily traceable to the finished product.

Incremental Profit

The additional profit that is generated by undertaking a particular action, such as producing an additional unit of product.