# ECONOMICS (CBSE/UGC NET)

## ECONOMICS

### INFLATION

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Over a period of a year, the annual rate of inflation falls from 10% to 6%.Which statement is correct? MAY/JUNE 2011 11
 A A The cost of living has increased. B B The purchasing power of money has increased. C C There has been a reduction in the Retail Price Index. D D The standard of living has increased.
Explanation:

Detailed explanation-1: -Use the inflation rate formula Subtract the past date CPI from the current date CPI and divide your answer by the past date CPI. Multiply the results by 100. Your answer is the inflation rate as a percentage.

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: -To calculate the inflation rate, subtract the past cost of an item from its current cost, and divide that result by the past cost. Your result will be a decimal number, so multiply it by 100 to get a percentage.

Detailed explanation-4: -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 รท \$1.60 = 0.6375) Multiply the previous answer by 100 to get a percentage.

There is 1 question to complete.