If the economy grew at 3% this year and average prices increased _____, people would be better off this year than last year.

Question

Quizplus · Accepted Answer

In this scenario, if the economy grew at 3% and average prices increased by less than 3%, it means that the real output has increased, and the purchasing power of people's income has also increased. Therefore, people would be better off this year than last year. If the average prices increased faster than 3%, it would mean that inflation has risen, which could offset the benefits of economic growth, and people might not be better off. Option A is incorrect because a 3% increase in output does not necessarily mean that the purchasing power has also increased by 3%. Option B and D are incorrect because they suggest a faster increase in prices compared to the economic growth, which would result in a decrease in people's purchasing power.

If the Economy Grew at 3% This Year and Average