In Nation A,the price index rises from 110 to 120 in a particular year.In the same year,the price level rises from 120 to 130 in Nation B.This means
A) inflation in both nations is 10 percent.
B) Nation B suffers from hyperinflation.
C) both nations suffer from hyperinflation.
D) Nation A is experiencing inflation but Nation B is experiencing deflation.
E) Nation A is experiencing inflation of less than 9.1 percent and Nation B is experiencing inflation of less than 8.4 percent.

Question

Quizplus · Accepted Answer

The inflation rate for Nation A is (120-110)/110 x 100% = 9.1%. The inflation rate for Nation B is (130-120)/120 x 100% = 8.3%. Therefore, both nations are experiencing inflation, but it is less than 10%, let alone hyperinflation. Option A is incorrect as it implies that inflation rates are the same for both nations. Option B and C are incorrect as hyperinflation occurs at very high rates of inflation, which is not the case here. Option D is incorrect as Nation A is experiencing inflation, not deflation.

In Nation A,the Price Index Rises from 110 to 120