If the ratio of the value of a set of goods expressed in current dollars to their value expressed in constant dollars is 1.54,prices on average must have risen by ________ percent.

Question

Quizplus · Accepted Answer

The ratio of the value of a set of goods expressed in current dollars to their value expressed in constant dollars is calculated by dividing the current value by the constant value.

Let the constant value be x, then the current value would be 1.54x (given ratio is 1.54)

Now, we know that the current value is the constant value adjusted for inflation, which can be calculated as:

Current value = Constant value * (1 + inflation rate)

Substituting the values we have:

1.54x = x * (1 + inflation rate)

1.54 = 1 + inflation rate

Inflation rate = 0.54 or 54%

Therefore, the average prices must have risen by 54%.

The correct answer is C) 54.

If the Ratio of the Value of a Set of Goods