Question 45

Price stability means that for some large market basket of goods the average price change of all the products is near zero.

Price stability is characterized by minimal fluctuations in the average prices of goods and services within an economy, indicating that the average price change is close to zero.

A) zero.

This option is correct as price stability is defined by an average price change that is close to zero, indicating that prices remain relatively constant over time and do not experience significant inflation or deflation.

B) one.

This option is incorrect because an average price change of one would imply a notable level of inflation or deflation rather than stability. Price stability is specifically about maintaining an average change near zero.

C) five.

This option is incorrect as well, as an average price change of five indicates substantial price movement, which contradicts the concept of price stability. Price stability requires minimal average price changes.

D) seven.

This option is also incorrect since an average price change of seven would signify considerable fluctuations in prices, making it inconsistent with the definition of price stability, which focuses on maintaining an average change near zero.

Conclusion

The correct answer is zero, as it accurately reflects the principle of price stability where average price changes are minimal. All other options, indicating higher average price changes, fail to align with the concept of price stability, which aims to minimize price fluctuations in the economy.