3) Employment tends to A) lag the cycle. C) sometimes lead, sometimes lag the cycle. D) be coincident with the cycle. Table 2-2 Year 1 Quantity 100 Year 2 Quantity 130 Price Price Apples Peaches $0.05 $0.03 $0.06 $0.04 300 270 4) Refer to above Table 2-2. Choosing the prices of year 2 gives a because year 2 prices place a rapidly. A) higher, lower, most C) lower, higher, least increase in real GDP valuation on quantities that have increased D) lower, lower, most 8) If real GDP helps to predict the path of a particular macroeconomic variable, it is said to be a A) conventional variable. C) lagging variable. D) leading variable.

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Inflation and Purchasing Power Theory

In economic terms, Inflation refers to the increase in the costs of various commodities which are used in daily lifestyle like food, clothes, transport, etc. over a specific time. It may lead to a fall in the purchasing power of the people and also affects the exchange rate of the currency because of the price increase. As the purchasing power falls the unit of the currency in the economy falls. When the prices of the commodities are decreased, then the purchasing power of the consumers will rise, then it will lead to deflation and changes the currency of the base economy to that of the foreign economy which will lead to change in exchange rates.