(Consider This) the Ratchet Effect Is the Tendency of

question 29

Multiple Choice

(Consider This) The ratchet effect is the tendency of

• A)the price level to increase but not to decrease.
• B)nominal GDP to increase more rapidly than real GDP.
• C)real interest rates to fall more rapidly than nominal interest rates.
• D)consumption to rise year after year regardless of what happens to disposable income.

---

Definitions:

Break-even Sales

The amount of sales revenue needed to cover all fixed and variable costs, leading to a situation where there is no profit or loss.

Fixed Costs

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

Break-even Point

The point at which total costs and total revenues are equal, meaning there is no profit or loss.

Unit Selling Price

The amount of money charged for one unit of a product or service.