Which of the following statements is true ?
A) Deflation is an increase in the general level of prices.
B) The consumer price index (CPI) measures changes in the average prices of consumer goods and services.
C) The real interest rate equals the nominal rate of interest plus the inflation rate.
D) Real income is the actual number of dollars received over a period of time.

Question

Quizplus · Accepted Answer

The consumer price index (CPI) is a measure of the average prices of a basket of goods and services consumed by households, which is used to calculate inflation. Deflation is the opposite of inflation, meaning a decrease in the general level of prices. The real interest rate is the nominal interest rate minus the inflation rate, and real income is the purchasing power of nominal income, which takes inflation into account. Therefore, the only statement that is true is B.

Which of the Following Statements Is True