Inflation is defined as a rise in the general level of prices. When inflation occurs, the buying power of the dollar would.
A. increase
B.decrease
C.remain stable
D. not be affected by inflation
decrease
Amity is right.
When prices rise, but people's income remains the same, they can buy less for their money. Prices rise; buying power decreases.
What do you think the answer is?
When inflation occurs, the buying power of the dollar would decrease (Option B).
To understand this, let's break it down. Inflation is the persistent increase in the general level of prices for goods and services over a period of time. This means that as inflation occurs, the prices of goods and services are generally rising.
When prices rise, each dollar has less purchasing power. In other words, you can buy fewer goods and services with the same amount of money due to higher prices. This decrease in buying power is a consequence of inflation.
To further illustrate this, consider a scenario where the inflation rate is 5%. If you have $100, the following year, the prices of goods and services might increase by 5%. As a result, your $100 will only be able to buy the equivalent of $95 worth of goods and services due to the effects of inflation.
Therefore, in the presence of inflation, the buying power of the dollar decreases.