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Question
What will happen to the value of money when price level rises? What is this phenomenon known as?
Solution
Money's value falls when prices rise. This is known as 'inflation'. Inflation is an increase in the price level of goods and services in an economy. The purchasing power of money decreases when each unit of currency purchases fewer products than previously.
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- What is meant by inflation? 2
- How is creeping inflation different from waling inflation? 2
- Explain the impact of inflation on: 3
- Wage earners and salaried class
- The investors
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- What do you mean by division of labour? 2
- Explain any two advantages of division of labour. 3
- 'Labour as a factor of production differs from other factors of production.’ In this context explain any two features of labour. 2
What is the meaning of inflation?
Observe the relationship of the first pair of words and complete the second pair.
During inflation the debtors gain and ______ lose.
Inflation means ______.
Identify the incorrect statement from the following:
Which of the following statements are true and which are false? Give reasons.
- Inflation refers to a persistent upward movement of the general price level.
- Inflation results in higher level of unemployment.
- Purchasing power of money falls when price level rises.
- Creditors gain during inflation.
- Creeping inflation is regarded essential for economic growth.
