PRC-2 · Chapter 9 · Question 36 of 60
In economic statistics, the 'purchasing power of money' is strictly defined as:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The reciprocal of the Consumer Price Index (1 / CPI).
Explanation
As prices (CPI) rise, the actual value or purchasing power of a single unit of currency inversely falls. It is mathematically calculated as the exact reciprocal of the price index.
More Indices MCQs
- Q38Conversely, what does the Laspeyres *Quantity* Index exclusively use as its weighting factor?
- Q39Which of the following index calculation methods relies heavily on the use of sequential 'link relatives'?
- Q40What is a 'Value Index' designed to mathematically measure?
- Q41When selecting a 'base year' for a price index, statisticians generally aim to pick a year that is:
- Q42What is considered a massive, practical advantage of utilizing a Chained Index over a Fixed Base Index?