MCQ4. Ten years ago it cost $10 to fill a car with unleaded petrol (with a 50L t
ID: 1140838 • Letter: M
Question
MCQ4. Ten years ago it cost $10 to fill a car with unleaded petrol (with a 50L tank). Today it costs $85 to fill the same tank. The average wage 10 years ago was $20,000 pa, today it is $95,000. which of the following statements is true: a. Given the level of inflation in the average wage, in real terms it costs the same fill up a car b. Given the level of inflation in the average wage, in real terms it costs less to fill up a car c. Given the level of inflation in the average wage, in real terms it costs more to fill up a car d. The rate of inflation in petrol is exactly the same as the rate of inflation in the wage, so e. There is not enough information to tell if it costs more or less than before. with petrol as it did 10 years ago. with petrol than it did 10 years ago. with petrol than it did 10 years ago. people are worse off.Explanation / Answer
Rate of Inflation in petrol = (85 - 10)/ 10 = 7.5*100 = 750%
while rate of inflation in average wage = (95000 - 20000)/20000 = 3.75 = 375%
It means that average wages are only increase by 375% while petrol prices rises by 750% so in real terms it costs more to fill up a car with petrol than it did 10 years ago.
It is so because the purchasing power fall as average wage increases less than price of petrol.
Correct ans is C) Given the level of inflation in the average wage, in real terms it costs more to fill up a car with petrol than it did 10 years ago.
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