If There Is Inflation and We Compare the Changes in a Nominal

question 135

Multiple Choice

If there is inflation and we compare the changes in a nominal variable over time versus its real counterpart,such as the nominal wage rate versus the real wage rate,we find that the

• A)two increase at about the same rate because of inflation.
• B)real wage rate increases faster because of inflation.
• C)nominal wage rate increases faster because of inflation.
• D)two decrease at about the same rate because of inflation.
• E)two change at a rate that does not depend on the inflation rate.

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Definitions:

Contribution Margin

The difference between total sales revenue and total variable costs, used to cover fixed costs and generate profit.

Contribution Format

An income statement format that separates fixed and variable costs, facilitating analysis of the impact of sales volume on profit.

Unit Contribution Margin

The amount that the sale of one unit contributes toward covering fixed costs and then to profit, calculated as the selling price per unit minus the variable cost per unit.

Contribution Margin Ratio

A financial metric that shows the percentage of sales revenue remaining after variable costs are subtracted, indicating how efficiently a company can produce and sell products.