Consider a Nation in Which the Price Index Last Year

question 6

Multiple Choice

Consider a nation in which the price index last year was 130 and this year it is 150.Which statement is correct?

• A) Inflation was 20 percent this year.
• B) Deflation was 20 percent this year.
• C) Housing prices must have risen.
• D) Inflation was 15 percent this year.
• E) Deflation was 15 percent this year.

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Definitions:

Appreciation

An increase in the value of an asset or currency over time.

Dollar

A widely used currency in international trade, often associated with the United States Dollar (USD), recognised by the symbol $.

Managed Float System

An exchange rate system in which a country's currency value is allowed to fluctuate in response to foreign exchange market mechanisms, with occasional intervention by the country's monetary authorities to stabilize the currency's value.

Exchange Rates

The value of one currency expressed in terms of another, determined by the foreign exchange market.