Suppose a family's income increases by 5 percent at the same time that inﬂation is 6 percent. Then the family's living standard
A) will increase by 5 percent.
B) will not change.
C) will increase by 1 percent.
D) will decrease.

Question

Quizplus · Accepted Answer

The family's income is increasing by 5% but the prices of goods and services are increasing by 6%. This means that the family's purchasing power has decreased and they can no longer afford the same amount of goods and services as before. Therefore, their living standard will decrease.

Suppose a Family's Income Increases by 5 Percent at the Same