ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The economic term for rising prices or price hike is “inflation”.

Detailed explanation-2: -In an inflationary environment, unevenly rising prices inevitably reduce the purchasing power of some consumers, and this erosion of real income is the single biggest cost of inflation. Inflation can also distort purchasing power over time for recipients and payers of fixed interest rates.

Detailed explanation-3: -Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.

Detailed explanation-4: -More jobs and higher wages increase household incomes and lead to a rise in consumer spending, further increasing aggregate demand and the scope for firms to increase the prices of their goods and services. When this happens across a large number of businesses and sectors, this leads to an increase in inflation.

Detailed explanation-5: -Find the average price in both years: $1.60 in 1992 and $2.62 in 2012. Enter the data into the equation. Subtract the 1992 price from the 2012 price ($1.02) Divide the difference by the original price. ($1.02 ÷ $1.60 = 0.6375) Multiply the previous answer by 100 to get a percentage.