Question

decide whether the following statement makes sense (or is clearly true) or does not make sense (or is clearly false). explain your reasoning.
when we chart the price of milk in 1995 dollars we find that it has become slightly more expensive, but when we chart it in 1975 dollars we find that it has become cheaper.
choose the correct answer below.
a. the statement makes sense because 1995 dollars are worth more than 1975 dollars.
b. the statement does not make sense because the same trend would be seen regardless of what kind of dollars are used.
c. the statement does not make sense because prices always rise with time.
d. the statement makes sense because 1975 dollars are worth more than 1995 dollars.

Explanation:

Since 1975, there has been inflation. So, 1975 dollars are worth more than 1995 dollars. When we adjust for inflation (using 1995 dollars, which have lower purchasing power due to inflation compared to 1975 dollars), the price increase might seem small. But when we use 1975 - dollar (more valuable) terms, the price decrease (relative to the more valuable 1975 - dollar) makes sense.

Answer:

D. The statement makes sense because 1975 dollars are worth more than 1995 dollars.