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Questions and Answers
What determines the weight of products and services in measuring inflation?
What determines the weight of products and services in measuring inflation?
- The overall prices of goods and services
- The supply and demand of products
- The government policies
- The spending habits of different households (correct)
What is the impact of inflation on the purchasing power of currency?
What is the impact of inflation on the purchasing power of currency?
- It fluctuates the purchasing power of currency
- It reduces the purchasing power of currency (correct)
- It increases the purchasing power of currency
- It has no impact on the purchasing power of currency
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Study Notes
- Inflation is a broad increase in prices of goods and services.
- Inflation reduces the value of currency over time.
- Prices of products we spend more on are given greater weight in measuring inflation.
- Different households have different spending habits.
- Average spending habits of all households determine weight of products and services in measuring inflation.
- All goods and services consumed by households are taken into account for measuring inflation.
- Everyday items, durable goods, and services are included in measuring inflation.
- Inflation means you can buy less for the same amount of money.
- Inflation affects the value of currency.
- Inflation is measured by the average increase in prices of goods and services.
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