If the price index rises from 100 to 120, the purchasing power value of the dollar
A) may either rise or fall.
B) will rise by one-sixth.
C) will fall by one-sixth.
D) will rise by 20 percent.

Question

Quizplus · Accepted Answer

An increase in the price index from 100 to 120 means that the general price level has increased by 20%. Therefore, the dollar's purchasing power value will decrease by 1/6 or 16.67%.

If the Price Index Rises from 100 to 120, the Purchasing