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UI Post-UTME Economics 2021 (Model questions) Question 15

Question 15

Money and Inflation

Which of the following statements is not correct?

  1. A.Inflation reduces the purchasing power of nominal income
  2. B.Inflation increases the cost of living in an economy
  3. C.Inflation acts just like a tax
  4. D.Inflation improves the welfare of people in an economy.
Show the answer and explanation

Answer: D (Inflation improves the welfare of people in an economy.)

Explanation

Inflation lowers what money can buy and raises living costs; it does not improve welfare.