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Purchasing power of money is
- a)Reciprocal of price index number
- b)Equal to price index number
- c)Unequal to price index number
- d)None of these
Correct answer is option 'A'. Can you explain this answer?
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Most Upvoted Answer
Purchasing power of money isa)Reciprocal of price index numberb)Equal ...
The purchasing power of money refers to the amount of goods and services that can be purchased with a unit of currency. It is affected by inflation, which is the general increase in the price level of goods and services in an economy over time. The purchasing power of money is related to the price level of goods and services.
Reciprocal of Price Index Number:
The purchasing power of money is the reciprocal of the price index number. The price index number is a measure of the average price level of goods and services in an economy. It is calculated by taking the ratio of the cost of a basket of goods and services in a particular year to the cost of the same basket of goods and services in a base year.
• The formula for calculating the price index number is:
Price Index Number = (Cost of basket of goods and services in a particular year / Cost of basket of goods and services in base year) x 100
• The reciprocal of the price index number is the value of the currency in terms of goods and services. It is the amount of goods and services that can be purchased with one unit of currency.
• For example, if the price index number is 150, then the purchasing power of money is 1/1.5 = 0.67. This means that one unit of currency can purchase only 0.67 units of goods and services.
Conclusion:
Therefore, the correct option is A, which states that the purchasing power of money is the reciprocal of the price index number.
Reciprocal of Price Index Number:
The purchasing power of money is the reciprocal of the price index number. The price index number is a measure of the average price level of goods and services in an economy. It is calculated by taking the ratio of the cost of a basket of goods and services in a particular year to the cost of the same basket of goods and services in a base year.
• The formula for calculating the price index number is:
Price Index Number = (Cost of basket of goods and services in a particular year / Cost of basket of goods and services in base year) x 100
• The reciprocal of the price index number is the value of the currency in terms of goods and services. It is the amount of goods and services that can be purchased with one unit of currency.
• For example, if the price index number is 150, then the purchasing power of money is 1/1.5 = 0.67. This means that one unit of currency can purchase only 0.67 units of goods and services.
Conclusion:
Therefore, the correct option is A, which states that the purchasing power of money is the reciprocal of the price index number.
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Purchasing power of money isa)Reciprocal of price index numberb)Equal ...
Equal to price index number.
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Purchasing power of money isa)Reciprocal of price index numberb)Equal to price index numberc)Unequal to price index numberd)None of theseCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Purchasing power of money isa)Reciprocal of price index numberb)Equal to price index numberc)Unequal to price index numberd)None of theseCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Purchasing power of money isa)Reciprocal of price index numberb)Equal to price index numberc)Unequal to price index numberd)None of theseCorrect answer is option 'A'. Can you explain this answer?.
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