When the CPI increases from one year to the next:
A. the cost of living has decreased.
B. deflation has occurred.
C. people need to spend more money to buy the same amount of goods as the previous year.
D. All of these statements are true.
C. people need to spend more money to buy the same amount of goods as the previous year.
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The nominal exchange rate is 15 crowns per florin, the domestic price level is 6 florins/bottle, and the foreign price level is 2 crowns/bushel
(a) What is the real exchange rate? (b) What is the real exchange rate in the foreign country? (c) If the domestic price level rises to 8 florins/bottle, what must the nominal exchange rate become if the real exchange rate remains unchanged?
If the price of a slice of pizza rises from $2.50 to $3, and quantity demanded falls from 10,000 slices to 7,400 slices, using the formula for arc price elasticity what is the percentage change in price?
A) 18.18% B) 29.89% C) 20% D) 16.67%