Suppose Inflation Comes in the Form of an Across-The Board

question 24

Multiple Choice

Suppose inflation comes in the form of an across-the board increase in all prices by some percentage k.For a consumer with exogenous income operating in a 2-good world, this will cause the budget constraint to

• A)rotate inward
• B)rotate outward
• C)shift out in a parallel way
• D)shift inward in a parallel way
• E)none of the above

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Definitions:

Manufacturing Overhead Costs

All indirect costs associated with the manufacturing process, including but not limited to utilities, maintenance, and salaries of non-direct labor.

Direct Labour Costs

Expenses associated with the wages of employees who are directly involved in the production of goods or services.

Nonmanufacturing Costs

Expenses not directly related to the production of goods, including sales, administration, and marketing costs.

Depreciation Factory Equipment

The systematic reduction in the recorded cost of factory equipment over its useful life, reflecting wear and tear or obsolescence.