When there is inflation,
A) average prices fall.
B) the value of money falls.
C) your standard of living rises if the prices of what you buy rise faster than your income.
D) the purchasing power of your savings rises.
E) your standard of living falls if your income rises faster than the prices of what you buy.

Question

Quizplus · Accepted Answer

Inflation refers to the general increase in prices of goods and services. This means that the value of money decreases, as it can buy fewer goods and services than before. Therefore, option B is the correct answer. The other options are incorrect - average prices do not fall during inflation, a rise in prices of what you buy does not necessarily lead to a rise in your standard of living, the purchasing power of your savings falls during inflation, and a rise in income may not necessarily lead to a fall in standard of living during inflation.

When There Is Inflation