When the price level rises by 5 percent, products that cost $20 last year now cost
A) $25.
B) $21.
C) $30.
D) $100.
E) $1.

Name: When the price level rises by 5 percent, products that cost $20 last year now cost A) $25. B) $21. C) $30. D) $100. E) $1.
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Question

Quizplus · Accepted Answer

If the price level rises by 5 percent, the cost of a product increases by 5 percent. So, a product that cost $20 last year would increase in price by 5% of $20, which is $1. Therefore, the new cost would be $20 + $1 = $21.

When the Price Level Rises by 5 Percent, Products That