Between 2013 and 2014,the CPI of a small nation rose from 182 to 185.If household incomes rose by 3% during that period of time,which of the following is true?
A)The purchasing power of household income rose between 2013 and 2014.
B)The purchasing power of household income fell between 2013 and 2014.
C)The purchasing power of household income remained constant between 2013 and 2014.
D)The CPI cannot be used to determine how the purchasing power of household income changes over time.

Question

Quizplus · Accepted Answer

The rise in CPI indicates inflation or a general increase in prices. However, the household incomes also increased by 3%, which means that the increase in income outweighed the increase in prices. Hence, the purchasing power of household income rose during that period of time.

Between 2013 and 2014,the CPI of a Small Nation Rose