Question

please answer them all

- Rahul M Chartered Accounta. Find me a tutor 4. Suppose the price of health services rises by 12 percent during a period while the level of average prices rise by 5 percent. We can suggest that the relative price of health services compared with price of other goods and services has: A. Increased B. Not changed C. Decreased D. Stabalized 5. Changes in relative prices may occur in a period of: P. Stable prices Q. Inflation R. Deflation S. All of the above 6. Income redistribution occurs during inflation because: Q. Rising prices affect lenders and borrowers differently. R. People Buy different combination of goods and services and own different type of assets. S. Some people have fixed incomes while others have flexible incomes. T. All of the above. 7. Your nominal income: A. Is the amount of money you recieve during a given time period. B. Is measured in current dollars. C. Does not measure your purchasing power D. All of the above 8. Your real income is: G. The amount of money you recieve during a given time period. H. Measured in current dollars. 1. The purchasing power of the money you recieve. J. All of the above.

Answer 1

Answer 4: Option A

If the price of health services rises by 12 percent during a period while the level of average prices rise by 5 percent, we can suggest that the relative price of health services compared with price of other goods and services has increased because the inflation in health services is more than average price. So the relative price of health services compared with price of other goods and services has increased .

Answer 5: Option S

Changes in relative prices may occur in a period of stable prices, inflation or deflation. So the option S is correct. A relative price is the price of one good in comparison with the price of other goods. Hence the changes in relative prices may occur in a period of stable prices, inflation or deflation.

Answer 6: Option T

Income redistribution occurs during inflation because rising prices affect lenders and borrowers differently. The borrowers gain from inflation because they repay lenders in currency that is worth less in terms of purchasing power. Another reason is that people buy different combination of goods and services and own different type of assets. Income redistribution also occurs during inflation because some people have fixed incomes while others have flexible incomes . So the correct option is option T.

Answer 7: Option D

Nominal income is the amount of money you receieve during a given time period. It measured in current dollars and does not measure the purchasing power. It is unadjusted for inflation. So the correct option is option D.

Answer 8: Option I

Real income is the income adjusted with inflation. It considers the effect of price rise on the purchasing power. If one gets a salary rise by 7% while inflation is 5% so his real income rose by only 2 %. So real income is the purchasing power of the money.