In the country of Krypton,the price of lead increased from $20 per kilogram to $22 per kilogram during a time when the overall price level increased by 6 percent.During this period,what happened to the real price of lead?
A) It has increased by about 2 percent.
B) It has decreased by about 4 percent.
C) It has decreased by about 8 percent.
D) It has increased by about 10 percent.

Question

Quizplus · Accepted Answer

To find the real price of lead, we need to adjust the nominal price for the overall price level increase. The formula to do this is: Real Price = Nominal Price / Price Level Index x 100. 
The price level index increased by 6%, so it is now 106. 
Real Price = 22 / 106 x 100 = 20.75. 
This means that the real price of lead decreased by about 4 percent (from $20.00 to $20.75). Therefore, the correct answer is B.

In the Country of Krypton,the Price of Lead Increased from $20