Answer to Question #186634 in Economics for Rugnes

Question

question: In Uganda, the rate of inflation fell from 5% in 2014 to 2% in 2015. which conclusion can be drawn from this information?

A. prices were higher in 2015 than in 2014

B the cost of living fell between 2014 and 2015

C. the standard of living fell between 2014 and 2015

D. Ugandan citizens were better off in 2015 than in 2014.

The correct answer is A.Can you explain why it's A.

Answer 1

Inflation is the decline of purchasing power of a given currency over time.

Even though the inflation rate in Uganda fell from 5% in 2014 to 2% in 2015, a decline of purchasing power of the national currency was still in place. In 2015 the prices were growing, but at a slower rate than in 2014. Therefore, prices were higher in 2015 than in 2014.