Question

Suppose over the last year that the price of iron ore increased from $1,200 a ton to $1,275 a ton. over the same time a measure of the overall price level increased from 150 to 156. the price of iron ore increased by
a. more than inflation, so it became more scarce.
b. less than inflation, so it became less scarce.
c. less than inflation, so it became more scarce.
d. more than inflation, so it became less scarce.

Answer 1

The price of iron ore increased by more than inflation, so it became more scarce. When inflation occurs there is an increase in the price of something but it results in the fall of purchasing value of money. Because the price of iron rose, it increase by more than inflation but due to the value of money dropping, it because more scare to purchase the iron.