Suppose that in 2012,all prices in the economy double and that all wages and salaries have also doubled.In 2012 you
A) are worse off than you were in 2011 as you can no longer afford to buy as many goods and services.
B) are better off than you were in 2011 as your salary is higher than it was in 2011 and you can now buy more goods and services.
C) are no better off or worse off than you were in 2011 as the purchasing power of your salary has remained the same.
D) cannot determine whether you are better off or worse off than you were in 2011, because the purchasing power of your salary cannot be determined.

Question

Quizplus · Accepted Answer

Since both prices and wages have doubled, the purchasing power of your salary remains the same. In other words, you can buy the same amount of goods and services as you could in 2011 with the same amount of money. Therefore, you are neither better off nor worse off than you were in 2011.

Suppose That in 2012,all Prices in the Economy Double and That