If a nation experienced an inflation rate of about 12 percent and then, 5 years later, had an inflation rate of about 15 percent, which of the following statements best describes what was happening to purchasing power during that period?
A) The purchasing power of businesses did not see a change throughout the period, but consumers did.
B) The average consumer's purchasing power was lower at the beginning of period than at the end.
C) The country was experiencing a recession, prices were universally high throughout the period, and purchasing power declined for everyone.
D) The average consumer's purchasing power was higher at the beginning of the period than at the end.

Question

Quizplus · Accepted Answer

Inflation reduces the value of money over time, meaning that with higher inflation rates, the amount of goods and services that can be bought with the same amount of money decreases. Therefore, if the inflation rate increased from 12 percent to 15 percent over five years, the purchasing power of the average consumer would have been higher at the beginning of the period than at the end.

If a Nation Experienced an Inflation Rate of About 12