Question

Suppose that in 2011 all prices in the economy double and that all wages and salaries have also doubled. In 2011 you

		cannot determine whether you are better off or worse off than you were in 2010, because the purchasing power of your salary cannot be determined.
		are better off than you were in 2010 as your salary is higher than it was in 2010 and you can now buy more goods and services.
		are worse off than you were in 2010 as you can no longer afford to buy as many goods and services.
		are no better off or worse off than you were in 2010 as the purchasing power of your salary has remained the same.

Answer 1

Answer is --------> Option D ---> Are no better off or worse off than you were in 2010 as the purchasing power of your salary remained the same.

Explanation :

Let me explain you this by example , Suppose your salary is $ 1000 per month and price of an item is $ 10 and so your purchasing power is  100 quantity from your current salary , now your salary doubles to $ 2000 per month and price of goods also double to $ 20 , which analyse that our purchasing power for the goods is still same which is 100 quantity .

From the above example we can determine that there wil be no better or worse situation arises if both salary or wages and price of items rise simultaneously and with same rate.

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