What is the main point of the passage?

Inflation is a general rise in prices that quietly shifts wealth between groups. (The passage defines inflation, shows how it is measured, then names the winners and losers. The last paragraph states the point: wealth moves without a decision.)

In the example, the basket cost 100 last year and 104 now. The passage says prices rose about

four percent (The text states it directly: "If the basket cost 100 last year and 104 now, prices have risen about four percent.")

Based on the passage, who is most likely to gain from fast inflation?

a person who borrowed money and repays it later (The passage says savers and lenders lose, and that "Borrowers, oddly, can gain." The first three choices are all savers or lenders.)

As used in this passage, a "basket" is

a fixed set of goods used to compare costs over time (The text explains it: economists "choose a basket of goods that an ordinary household buys" and measure what that same basket costs each month.)

When Prices Rise: Level 3 Reading Comprehension Questions

Inflation means that prices, taken together, rise over time. A single price can jump for its own reasons, as when a bad harvest raises the cost of coffee, but inflation is broader. It is the general level of prices moving up, so each unit of money buys a little less than it did before.

Economists track this with a price index. They choose a basket of goods that an ordinary household buys, such as food, rent, fuel, and clothing, and they measure what that same basket costs each month. If the basket cost 100 last year and 104 now, prices have risen about four percent.

Mild inflation is normal, and most central banks aim for a small, steady rate. The trouble begins when inflation is fast or hard to predict. Savers lose, because money kept in a drawer quietly loses purchasing power. Lenders lose too, since they are repaid in money worth less than the money they handed over. Borrowers, oddly, can gain.

That is why inflation is not only an economic event. It moves wealth from one group to another, and nobody ever decided that it should.

Comprehension questions