If a nation experienced an inflation rate of about 12 percent and then,five years later,had an inflation rate of about 5 percent,which of the following statements best describes what was happening to purchasing power during the period?
A) The purchasing power of businesses did not see a change throughout the period,but consumers did.
B) The average consumer's purchasing power was lower at the beginning of period than at the end.
C) The country was experiencing a recession,prices were universally high throughout the period,and purchasing power declined for everyone.
D) The average consumer's purchasing power was higher at the beginning of the period than at the end.

Question

Quizplus · Accepted Answer

The inflation rate is a measure of how much the overall price level is increasing over time. If the inflation rate is 12 percent, it means that the average price level is 12 percent higher than it was a year ago. This means that the purchasing power of money has decreased - in other words, you can buy fewer goods and services with the same amount of money. If the inflation rate is 5 percent, the same thing is happening, but to a lesser extent. Therefore, the average consumer's purchasing power was higher at the beginning of the period than at the end.

If a Nation Experienced an Inflation Rate of About 12