If the cost of groceries goes up by 10 percent this year,the amount of groceries you can buy for $50 decreases by that same 10 percent.This is an example of
A)a decline in GDP.
B)a decrease in purchasing power.
C)a recession.
D)deflation.
E)a rise in GDP.

Question

Quizplus · Accepted Answer

When the cost of goods increases, the purchasing power of money decreases. In this case, the amount of groceries you could buy for $50 decreases by 10%, indicating a decrease in purchasing power. This is not necessarily indicative of a decline in GDP, a recession or deflation, and there is no evidence of a rise in GDP in the given scenario.

If the Cost of Groceries Goes Up by 10 Percent