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 much lower than the actual price for both years.
B) the inflation-adjusted price of the bar would be much higher than the actual price for both years.
C) Hershey's has 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 inflation-adjusted price would be higher in 1955 because the price index increased, indicating inflation. The actual price remained the same, so the inflation-adjusted price is higher than the actual price.

If a Hershey's Chocolate Bar Cost $0