AP Macroeconomics Question 357: Answer and Explanation
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4. If your nominal income rises 4 percent and your real income falls 1 percent, by how much did the price level change?
- A. 5 percent decrease
- B. ¼ percent increase
- C. 3 percent increase
- D. 3 percent decrease
- E. 5 percent increase
Correct Answer: E
E-The %Δ in real income is equal to the %Δ in nominal income less the rate of inflation.