ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A The cost of living has fallen.
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B The purchasing power of money has fallen.
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C The standard of living has increased.
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D There has been an increase in the Consumer Price Index.
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Detailed explanation-1: -Deflation, or negative inflation, happens when prices generally fall in an economy. This can be because the supply of goods is higher than the demand for those goods, but can also have to do with the buying power of money becoming greater.
Detailed explanation-2: -A sustained increase in the general price level represents the true definition of inflation and thus option (e) is the correct option.
Detailed explanation-3: -Deflation is calculated in the same way inflation is calculated. The only difference is deflation figures are negative. The formula for calculating deflation is: Deflation=(Price index of base year-Price index of current year)/ Price index of base year.
Detailed explanation-4: -The true statement is option d) It refers to an increase in the average level of prices. The inflation over a given period signifies the general increase in the average price level of goods and services.