What does the term "standard of living" refer to?

The term "standard of living" refers to the amount of goods and services people can buy with the money they have, which captures a broader understanding of well-being in an economic context. It provides insight into how comfortable and secure individuals or communities feel based on their purchasing power relative to the cost of living in their area. This encompasses not just income, but also factors like inflation, access to necessities, quality of services, and overall economic conditions that affect a person's ability to afford basic and luxury items.

While average income per household can contribute to the standard of living, it doesn't fully encapsulate the concept by itself, as it doesn't account for how far that income can stretch. Additionally, the level of economic activity in a country affects the standard of living but is not a direct measure of it. Likewise, total wealth might give an idea of financial security but does not reflect the day-to-day economic realities faced by individuals in terms of purchasing goods and services. Thus, option B is the most accurate choice for describing the term "standard of living."