Suppose that in 2016,all prices in the economy double and that all wages and salaries also double.In 2016 you
A)are worse off than you were in 2015 as you can no longer afford to buy as many goods and services.
B)are better off than you were in 2015 as your salary is higher than it was in 2015 and you can now buy more goods and services.
C)are no better off or worse off than you were in 2015 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 2015,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. This means that you can still afford the same amount of goods and services in 2016 as you could in 2015, despite the increase in prices. Therefore, you are not better off or worse off than you were in 2015.

Suppose That in 2016,all Prices in the Economy Double and That