Question

If the price index rises from 100 to 120, the purchasing power value of the dollar:

A. may either rise or fall
B. will rise by one-sixth.
C.will fall by one-sixth.
D. will rise by 20 percent.

Answer 1

Answer: C.will fall by one-sixth.

Explanation:

As the consumer price index rises the purchasing power declines. The only constant component which rises is the inflation.