International Baccalaureate (IB) Practice Exam

Does inflation impact a person's buying power?

1. True

2. False

The correct answer is: False

Inflation affects a person's buying power by decreasing it. When inflation occurs, the general price levels of goods and services rise, meaning that the same amount of money buys fewer products than it did previously. As prices increase, consumers find that they need to spend more to maintain their standard of living, which ultimately results in a reduction in purchasing power. This essential economic principle demonstrates how inflation can erode the value of money over time, affecting individuals' ability to afford the same goods and services they could in the past. Therefore, the correct answer is that inflation does impact a person's buying power, making this a true statement.