If the nominal price of apples has increased by 20 percent over a year in which the average price level has risen by 10 percent,then the real price of apples:
A)has increased.
B)has stayed the same.
C)has decreased.
D)cannot be determined without further information.

Question

Quizplus · Accepted Answer

The real price of apples is adjusted for inflation, and can be found by dividing the nominal price by the price level. In this case, the nominal price of apples has increased by 20%, while the price level has increased by 10%. This means that the real price of apples has increased by 10% (20% - 10% = 10%). Therefore, choice A is correct.

If the Nominal Price of Apples Has Increased by 20