Question

8. What does it mean to say that the inflation rate last year was 7%?

   1. A) All prices are 5% less at the end of the year than they were at the beginning of the

      year.

   2. B) The price of specific products increased 7% between the beginning and the end of the

      year.

   3. C) On average, a typical basket of goods costs 7% more at the end of the year than it did

      at the beginning of the year.

   4. D) The general purchasing power of the dollar has increased 7% between the beginning of

      the year and the end of the year.

Answer 1

Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country. But it can also be more narrowly calculated—for example, for certain goods, such as food, or for services, such as school tuition. Whatever the context, inflation represents how much more expensive the relevant set of goods and/or services has become over a certain period, most commonly a year.

so the correct answer will be

B)The price of specific products increased 7% between the beginning and the end of the year.

because prices increase in infaltion so A) cannot be true

Inflation happens over a period of a year as discussed earlier so C) cannot be true

Inflation causes the purchasing power to be decreased by the percent of inflation so D) canot be true