Price stability means that for some large market basket of goods the average price change of all the products is near
Price stability means that for some large market basket of goods, the average price change of all the products is near zero.
Price stability refers to a situation in which the overall level of prices does not experience significant fluctuations over time. This implies that the average change in prices for a comprehensive set of goods remains close to zero, indicating a stable economic environment.
This option correctly captures the essence of price stability, which is characterized by minimal fluctuations in the average prices of goods within a market basket. A near-zero average price change indicates that prices are stable and not subject to significant inflation or deflation.
While zero implies no change in prices, price stability does not necessarily mean that prices must remain absolutely constant. It allows for minor fluctuations around a stable average, making this option too restrictive to encompass the broader concept of price stability.
An average price change of one suggests a consistent increase in prices, which contradicts the notion of price stability. Price stability focuses on maintaining equilibrium in price changes, rather than promoting a specific increase or decrease.
Similar to option C, an average price change of five indicates a significant increase in prices, which would be a sign of inflation rather than stability. Price stability, by definition, should reflect minimal change, not a substantial rise.
This option also implies a considerable increase in prices, further deviating from the concept of price stability. An average price change of seven would indicate instability and potential inflation, which contradicts the idea of a stable economic environment.
Price stability is defined by minimal fluctuations in the average price changes within a market basket of goods, ideally hovering around zero. This concept ensures economic predictability and maintains the purchasing power of currency. The other options imply significant changes or specific values that do not accurately reflect the condition of stability in prices.
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