According to the Bank of your country, annual inflation is 3.5% and you have a small...

According to the Bank of your country, annual inflation is 3.5% and you have a small business whose business is services. In 2015 you sold $ 1,525,000. In 2016 you sold $ 1,570,000. Apparently you achieved an increase in your sales. Is this true or false?

Expert Solution

Answer - False

Value of sales in 2015 = $ 1525000

Value of nominal sales in 2016 = $ 1570000

Rate of inflation = 3.5 %

Real value of sales in 2016 = 1570000-3.5%

= $ 1515050

Hence in the real terms , the sales have not increased. They have fallen by $ 9950.

Rahul Sunny answered 2 years ago

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