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If the price index rises from 200 to 250, the purchasing power value of the dollar: may either rise or fall. will fall by 25 percent. will fall by 20 percent. will rise by 25 percent.

Answer :

imustapha180

Answer:

It will fall by 20%

Explanation:

The reason being that by definition the purchasing power of a currency decreases as the price level rises.

Divide the old price index which is (200) by the new price index (250) and then multiply by 100. This will give you 80%. This means that the purchasing power of dollar declined by 20%.

Mathematically;

(Old Price Index)/(New Price Index)×100

200/250×100 = 80%

Which means 100%-80% =20%

It means the purchasing power value of dollar has fallen by 20%

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