Question

In the kingdom of Guttenberg, they’ve decided it’s a good idea to use more currency bills so as to give work to the printing industry. Hence, overnight there is an announcement that every price will increase by a factor of 2: things that were $1 are now $2 and things that were $10 are now $20. Which of the following will change?

1. Output, Y
2. The real wage rate
3. The interest rate
4. The price level P
5. The nominal rental rate of capital R

Answer 1

Answer:

4. The price level P 

Explanation:

The price level would double. Goods and services would now be twice as expensive.

This is known as a nominal increase because the increase is not accompanied with increase in output.

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