If the Inflation Rate Is 5 Percent and You Receive

question 89

Multiple Choice

If the inflation rate is 5 percent and you receive a wage increase of 5 percent,

• A)your nominal income declines but your real income increases
• B)both your nominal income and your real income increase by 5 percent
• C)your nominal income increases but your real income declines
• D)both your nominal income and your real income decrease by 5 percent
• E)your nominal income increases by 5 percent but your real income is unchanged

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Definitions:

Special Order

A one-time order that is not considered part of the company’s normal ongoing business.

Capacity

The maximum output that a business can produce in a given period with available resources.

Production Constraint

Any factor that limits the volume or type of production a company can achieve, such as equipment capacity or availability of materials.

Contribution Margin

The amount of revenue from sales that exceeds the variable costs associated with producing a product, indicating how much revenue contributes towards covering fixed costs and profit.