AP Macroeconomics Question 357: Answer and Explanation

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Question: 357

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.