Question

2. If the price index for the year, say 1960 be 110.3 and the price index for the year, say 1950
be 98.4, then the purchasing power of money (Rupees) of 1950 will in 1960 is
(a) ₹1.12
(b) ₹1.25
(c) ₹1.37
(d) None of these.​

Answer 1

Question :- If the price index for the year, say 1960 be 110.3 and the price index for the year, say 1950 be 98.4, then the purchasing power of money (Rupees) of 1950 will in 1960 is

(a) ₹1.12

(b) ₹1.25

(c) ₹1.37

(d) None of these.

Answer :- (a) ₹1.12 .

Explanation :-

Let p1 is the price index in the year 1950 and p2 is the price index in the year 1960.

Than, we have :-

• p1 = 98.4
• p2 = 110.3

Now, we know that,

• Purchasing power = (Index number for base year)/(Index number for current year)
• Purchasing power = (p2 / p1)

So,

→ Purchasing power of rupees in 1960 compared to 1950 is = Rs. (110.3) / (98.4) ≈ ₹1.12 (Ans.)

Hence, the purchasing power of money (Rupees) of 1950 will in 1960 is ₹1.12 .

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