AP Macroeconomics Question 324: Answer and Explanation
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7. If the consumer price index (CPI) increases by 2 percent and your nominal income increases by 8 percent, your real income has approximately
- A. increased by 4 percent.
- B. decreased by 4 percent.
- C. increased by 6 percent.
- D. decreased by 6 percent.
- E. increased by 10 percent.
Correct Answer: C
C-The percentage change in real income is approximately equal to the percentage change in nominal income minus the percentage change in the price level.