If the price index rises from 100 to 120, the purchasing power of money: MCQ with Answer and Explanation

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If the price index rises from 100 to 120, the purchasing power of money:

A. Decreases by 20%

B. Increases by 20%

C. Decreases by 16.67%

D. Remains unchanged

Answer: Option C

Solution (By JKSSB Mock Tests)

Purchasing power = 1/price index. Old: 1/100=0.01, new: 1/120≈0.00833, decline = (0.01-0.00833)/0.01 = 0.1667 or 16.67%.

This question belongs to: Accountancy and Statistics Statistics

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