Inflation:
A) reduces the cost-of-living of the typical worker.
B) is measured by changes in the cost of a typical market basket of goods between time periods.
C) causes the purchasing power of a dollar to rise.
D) has no effect on real income.

Question

Quizplus · Accepted Answer

Inflation is measured by changes in the cost of a typical market basket of goods between time periods. It does not reduce the cost-of-living of the typical worker, but rather can increase it if wages do not keep pace with inflation. Inflation also decreases the purchasing power of a dollar, rather than causing it to rise. It can have an effect on real income, as the value of money decreases with inflation.