A farmer produces the same output in 2015 as in 2014.His input prices increase by 3 percent and so does his product price.Which inflation rate makes the farmer as well off in 2015 as in 2014?
A) 0 percent
B) 1 percent
C) 3 percent
D) 6 percent

Question

Quizplus · Accepted Answer

If both input prices and product prices increase by 3 percent, the farmer's costs and revenues increase proportionally, maintaining his purchasing power and making him as well off as before, assuming a 3 percent inflation rate.

A Farmer Produces the Same Output in 2015 as in 2014.His