Question on: JAMB Economics - 2014
Given a base year and the price index of 175% the following year, which of the following year will arise?
A
The cost of living decreases of that year
B
The cost of living remains unchanged
C
The value of money rises by 75%
D
The value of money falls by 75%
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Correct Option: A
Here's the breakdown:
* **Price Index:** A price index measures the average price of a basket of goods and services over time relative to a base year.
* **175% Price Index:** A price index of 175% means that prices have increased by 75% compared to the base year (175 - 100 = 75).
* **Value of Money and Inflation:** When the price level increases (inflation), the purchasing power or value of money decreases. In other words, you can buy fewer goods and services with the same amount of money.
* **Therefore:** If prices have risen by 75%, the value of money has fallen by approximately 75%.
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