If a Hershey's chocolate bar cost $0.05 in 1921 when the price index was 18 and the same size and weight Hershey's chocolate bar cost $0.05 in 1955 when the price index was 27,then
A) the inflation-adjusted price of the bar would be lower in 1955 than in 1921.
B) the inflation-adjusted price of the bar would be higher in 1955 than in 1921.
C) Hershey's mispriced the bar due to a price confusion problem.
D) the United States must have experienced deflation during the period from 1921-1955.
E) menu costs for Hershey's were high.

Question

Quizplus · Accepted Answer

The fact that the price of the Hershey's chocolate bar remained the same between 1921 and 1955 suggests that the price level did not change significantly during this time period. However, the increase in the price index from 18 to 27 suggests that overall prices did rise during this period. Therefore, the inflation-adjusted price of the Hershey's chocolate bar would be lower in 1955 than in 1921.

If a Hershey's Chocolate Bar Cost $0