The Natural Rate Hypothesis States That When the Inflation Rate

question 24

Multiple Choice

The natural rate hypothesis states that when the inflation rate

• A)changes,the change is only temporary and eventually the inflation rate returns to the natural inflation rate.
• B)changes,the unemployment rate changes temporarily and eventually returns to the natural unemployment rate.
• C)increases,the natural unemployment rate increases.
• D)decreases,the inflation rate will decrease permanently.
• E)increases,the unemployment rate will decrease permanently.

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Definitions:

Selling Price

The price at which a product or service is offered to customers.

Contribution Margin Ratio

The percentage of sales revenue that exceeds variable costs, indicating the portion of sales available to cover fixed costs and generate profit.

Fixed Costs

Expenses that do not fluctuate with changes in production level or sales volume, such as lease payments, salaries, and insurance.

Operating Leverage

A financial concept that measures the extent to which a firm can increase operating income by increasing revenue, highlighting the impact of fixed versus variable costs.