n NISM Certifications
X NISM Series X
Medium

Which statement correctly describes the relationship between inflation and the purchasing power of money?

Practice question from NISM Series XB- Investment Adviser (Level 2) Mock Test 6 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Not related

  2. Inflation diminishes purchasing power

    Correct answer

  3. C

    Inflation increases purchasing power

  4. D

    Purchasing power remains constant regardless of inflation

Why this is the answer

Inflation causes prices to rise, reducing the value or purchasing capacity of money over time, thereby eroding its real worth.

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