What is the term for when prices go up and your money buys less than before?

Prepare for the NGPF Personal Finance – Investing Test with multiple choice questions, hints, and explanations. Boost your financial literacy and investment skills. Get exam-ready!

Multiple Choice

What is the term for when prices go up and your money buys less than before?

Explanation:
Inflation is the general rise in prices over time, which means your money buys less. When prices go up, each dollar buys fewer goods and services, so your purchasing power falls. For example, if prices rise 3% in a year, something that cost $100 would cost about $103 next year, and your $100 would buy less. Economists measure inflation with indices like the Consumer Price Index to track this overall price movement. The other terms describe types of investments or portfolios, not the change in the price level itself, so they don’t capture what’s happening to purchasing power over time.

Inflation is the general rise in prices over time, which means your money buys less. When prices go up, each dollar buys fewer goods and services, so your purchasing power falls. For example, if prices rise 3% in a year, something that cost $100 would cost about $103 next year, and your $100 would buy less. Economists measure inflation with indices like the Consumer Price Index to track this overall price movement. The other terms describe types of investments or portfolios, not the change in the price level itself, so they don’t capture what’s happening to purchasing power over time.

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