When the price of gasoline rises by 40 percent, but your salary remains the same, it...

When the price of gasoline rises by 40 percent, but your salary remains the same, it is an example of a decline in your:

standard of living

purchasing power

GDP index

cost of living index

gross economic income

Expert Solution

Ans- Option 2. Purchasing power

Purchasing Power is the value that a unit of currency can buy. The unit of currency can be expressed as amount that can buy goods or services.

When the income of the person stays the same but the Prices of goods and services rises, it denotes the decline in Purchasing power of that Person. As in this question Salary remains the same but price of gasoline rises by 40%, it is an example of a decline in his Purchasing power.

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