Question

Suppose that in some country the price of silver increased from $30 per ounce to $31 per ounce during a time when the overall price level increased by 5 percent. During this period, the real price of silver

a. increased.

b. decreased.

c. stayed the same.

d. might have increased, decreased or stayed the same; more information is needed to be sure.

Answer 1

Answer:

b. decreased.

Explanation:

The price of silver increased by $1. The overall price increased by 5% = 1.05 × $30 = $31.50.

Therefore, the price of silver should be $31.50 but it is $31. This indicates that the real price of silver fell.

I hope my answer helps you