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Price is not the same thing as value. Suppose that on a day the price of everything viz., coal, bread, postage stamps, a day's labour, the rent of houses, etc_ were to double. Prices then would certainly rise, but values of all things except one would not." The writer wants to say that if prices of all things were doubled, then
1. The values of all things would remain constant
2. The values of the things sold would be doubted
3. The values of the things bought would be halved
4. The value of money only would be halved

1 Answer

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Best answer
Correct Answer - Option 4 : The value of money only would be halved

Option 1 and 2 can be eliminated because it can be understood from the statement that value would not remain constant and value would not get doubled.

Option 3 can be eliminated because the value of things does not depend on their price.

Option 4 is correct because when prices are doubled, the value of money becomes half. One can buy half the thing with the same amount of money. This can be understood by inflation and purchasing powers.

Hence, option 4 is the correct answer.

  • Inflation is an increase in the general level of prices of goods and services over a period of time: the inflation rate is the annualized percentage change in the general price index (consumer price index)
  • When prices increase we have less money at our disposal to buy goods and services: inflation reflects a reduction in our purchasing power.
  • If we lose purchasing power we buy less, and if we all buy fewer companies shut down and people lose their jobs
  • Printing money so we all can continue buying and keep our jobs is not the solution; in fact, it’s like adding wood to the fire: an increase in circulating money can cause an increase in the demand for a certain good or service, the price of which will increase because the offer will not meet demand levels
  • Without external controls, inflation generates inflation in an upward spiral: an increase in prices causes us to lose purchasing power, so we’ll want to earn more which causes production costs to increase, so prices will increase causing us to lose again purchasing power.

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