Set 2: Central Ideas (Intermediate)
Explanation
PASSAGE
The following text discusses the concept of Inflation. In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money. While high inflation is generally considered harmful, a low, steady rate of inflation is often viewed as a sign of a growing economy.
What is the direct consequence of rising inflation according to the text?
Detailed Explanation
Choice B is correct. The text states: 'consequently, inflation reflects a reduction in the purchasing power per unit of money.'
Key Evidence:
• "each unit of currency buys fewer goods"
• "reduction in the purchasing power"
Why others are wrong: A (Opposite), C (Not mentioned), D (Too extreme).