The price of a phone call at a pay phone was 5 cents in 1950 and the price of a first-class stamp was 3 cents. In 2014, the pay phone costs 50 cents for a call and a first-class stamp costs 49 cents. We know that
A) both the nominal and the relative price of phone calls increased from 1950 to 2014.
B) both the nominal prices of phone calls and first-class stamps increased from 1950 to 2014, but the relative price of stamps increased and the relative price of phone calls decreased from 1950 to 2014.
C) all prices increased from 1950 to 2014: Nominal prices of phone calls, first-class stamps, and the relative prices of phone calls and first-class stamps.
D) both the nominal prices of phone calls and first-class stamps increased from 1950 to 2014, but we can't tell if the relative prices increased or decreased without more information.
B
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In the graph for the consumption function, the 45-degree line
A) contains only a consumption component.
B) represents both planned consumption and planned investment.
C) shows various combinations where planned consumption equals real disposable income.
D) reflects a decreasing APC as real disposable income rises.
Using Figure 1 above, if the aggregate demand curve shifts from AD3 to AD2 the result in the long run would be:
A. P1 and Y2. B. P2 and Y1. C. P3 and Y1. D. P3 and Y2.
An agreement to reduce the volume of trade in a specific good is
A. An embargo. B. A voluntary restraint agreement. C. A quota. D. The terms of trade.
Economists believe that the CPI overstates actual price changes by as much as ________ to ________ percent each year.
A. 1; 2 B. 2; 3 C. 0.5; 1 D. 0.5; 1.5