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If the price level in current year increases by 20% compared to base year, then purchasing power of rupee will be:
  • a)
    83 paise
     
  • b)
    120 paise
  • c)
    80 paise
  • d)
    20 paise
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
If the price level in current year increases by20%compared to base yea...
Let the Index number at base year be Rs. 100.
The price level in current year increases by 20% compared to base year =20% of 100= Rs. 20
∴ The Index number at Current Year =100+20=120
Now purchasing power of a rupee is defined as
Purchasing power = 
∴ Purchasing power = 
∴ If the price level in current year increases by 20% compared to base year, then purchasing power of rupee will be 83 paise.
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Most Upvoted Answer
If the price level in current year increases by20%compared to base yea...
Explanation:

Given:
Price level increase: 20%

Formula:
Purchasing Power of Rupee = 1 / (1 + Inflation Rate)

Calculation:
Inflation Rate = 20%
Purchasing Power of Rupee = 1 / (1 + 0.20)
Purchasing Power of Rupee = 1 / 1.20
Purchasing Power of Rupee = 0.83
Therefore, the purchasing power of the rupee will be 83 paise.

Conclusion:
The correct answer is option 'A' - 83 paise.
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If the price level in current year increases by20%compared to base year, then purchasing power of rupee will be:a)83paiseb)120 paisec)80 paised)20 paiseCorrect answer is option 'A'. Can you explain this answer?
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