Martha visits a department store and discovers that a box of exotic candles will cost 10 percent more than what she had paid six months ago.Similar increases in prices across most goods and services is happening throughout the country.In this scenario,which statement is true?
A) Martha's purchasing power would remain unchanged if she has a pay raise to match the inflation.
B) She would have to pay 12 percent more than what she paid last month.
C) The department store's marketing strategy is to increase its profit margin by increasing the prices of its goods.
D) The candles' subjective value increases with the increase in inflation.

Question

Quizplus · Accepted Answer

If Martha receives a pay raise that matches the inflation rate, her purchasing power would remain unchanged because her income would increase proportionally to the rise in prices.

Martha Visits a Department Store and Discovers That a Box