If Deflation Occurs and Your Income Is Fixed, Your Real

question 55

Multiple Choice

If deflation occurs and your income is fixed, your real income:

• A) will fall.
• B) will go up.
• C) will still be equal to your nominal income.
• D) is constant.

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Definitions:

Average Fixed Cost

The fixed costs (costs that do not change with the level of output) of production divided by the quantity of output produced, decreasing as production increases.

Total Cost

The full price of producing goods, encompassing both stable and changeable expenses.

Eyeglasses

Corrective or protective devices worn on the eyes, consisting of lenses mounted in a frame, to improve vision or protect the eyes from damage or light.

Average Variable Cost

The variable cost per unit of output, calculated by dividing total variable costs by the total output.