Compounding means that changes in living standards depend:
A)only on the initial level of income.
B)only on the accumulation of changes in income since the initial year.
C)on both the initial level of income and the accumulation of changes in income every year since the initial year.
D)on neither the initial level of income nor the accumulation of changes in income since the initial year.

Question

Quizplus · Accepted Answer

Compounding refers to the process where the value of an investment increases because the earnings on an investment, both capital gains and interest, earn interest as time passes. This concept applies to living standards in that improvements depend not just on the initial level of income but also on the accumulation of changes in income over time, as each year's income growth builds on the previous years'.

Compounding Means That Changes in Living Standards Depend