An Economy Growing at a Consistent Rate of 5 Percent

question 94

Multiple Choice

An economy growing at a consistent rate of 5 percent per year will double its income in

• A) twenty-five years.
• B) twenty-one years.
• C) fourteen years.
• D) twelve years.

---

Definitions:

Net Income

The total earnings of a company after subtracting all expenses, taxes, and losses.

Variable Costing Approach

An accounting method that considers only variable costs as product costs and all fixed costs as period costs, affecting inventory valuation and profitability.

Absorption Cost Approach

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

Fixed Costs

Expenses that do not change with the level of production or sales activities, such as rent, salaries, and insurance.