Question

indicate whether the following statement is true or false and why." a wage rising slower than the rate of inflation is actually falling"a. false. a higher wage increases purchasing power regardless of inflationb. true. if wages are increasing slower than the average price of goods and services, purchasing power increasesc. true. if wages are increasing slower than the average price of goods and services, purchasing power fallsd. false. a higher wage decreases purchasing power regardless of inflation

Answer 1

Answer:

The correct answer is option c.

Explanation:

Inflation implies an increase in the general price level. It reduces the purchasing power of consumers.  

If the wages are increasing slower than the rate as inflation it means that the disposable income is increasing at a slower rate than the increase in prices. It implies that purchasing power is declining.  

If wages are increasing at the same rate as inflation, it means that the purchasing power is constant. If wages are increasing at a faster rate than the increase in the inflation rate, it means that the purchasing power is increasing.