Inflation, Price Indexes and Real Values · seed 1 · A4, ink-friendly. The answer key prints on its own page for grown-ups.

Reading prices across years fairly

Civics & Economics · Economics · ages 15-16
Name ______________________   Date ____________

  1. A basket index moves from 100 to 103. Type the inflation rate as a percent.

    Answer: ______________

  2. Phones get cheaper while most prices climb. Is this inflation?

    • No, inflation tracks the general level, not single tags
    • Yes, one falling tag ends inflation
    • Only on weekends

  3. What is hyperinflation?

    • Prices sprinting daily until money stops working
    • One shop raising one price
    • Steady prices for a decade

  4. Who tends to gain from surprise inflation?

    • Fixed-rate savers
    • Borrowers, who repay in cheaper coins
    • Nobody ever

  5. A wage rises 3 percent while prices rise 5 percent. Is the worker better off?

    • Yes, any rise helps
    • No, buying power fell in real terms
    • Only if phones got cheaper

  6. An index moves from 120 to 126. Type the inflation rate as a percent.

    Answer: ______________

  7. A village household feels squeezed although the index looks calm. What best explains it?

    • Inflation never touches villages
    • Baskets cannot be priced
    • Their basket and swaps differ from the averaged basket

  8. A worker celebrates a doubled wage while prices tripled. What is the error?

    • The worker is plainly richer
    • Nominal doubling hides a real fall once converted to today's money
    • Tripling prices help savers
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Answer key

For grown-ups. Fold this page away before handing over the rest.

Reading prices across years fairly W1-mt_58FeRqSjYh-s1

  1. 3 · The percent change from 100 to 103 is 3 percent.
  2. No, inflation tracks the general level, not single tags · Inflation is the whole level moving, never one lonely price.
  3. Prices sprinting daily until money stops working · Runaway daily rises destroy money as a store of value.
  4. Borrowers, who repay in cheaper coins · Debts melt in real terms while fixed savings lose.
  5. No, buying power fell in real terms · Divide by the price level first: the bigger number buys less.
  6. 5 · The rise of 6 on a base of 120 is 5 percent.
  7. Their basket and swaps differ from the averaged basket · The index averages many lives, including lives unlike theirs.
  8. Nominal doubling hides a real fall once converted to today's money · Real comes first: convert, then judge.
Worksheet · LightMySky