When There Is Inflation

question 152

Multiple Choice

When there is inflation,

• A) average prices fall.
• B) the value of money rises.
• C) the purchasing power of your savings falls.
• D) the purchasing power of your savings rises.
• E) your standard of living falls if your income rises faster than the prices of what you buy.

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Definitions:

Direct Materials

Raw materials that can be directly traced to the manufacturing process of a product and are a significant part of its cost.

Secondary Materials

Materials used in the production process that are not the primary raw materials.

General Materials

Basic supplies and resources used in the everyday operations of a business, not directly tied to the production of specific goods.

Factory Overhead

Costs associated with the operation of a manufacturing plant that are not directly tied to individual products, such as maintenance.