$$\begin{array}{l}
\begin{array} { | c | c | }
\hline \text { Good } & \begin{array} { c }
\text { Price Increase since } \
\text { Last Year }
\end{array} \
\hline \text { Amusement park tickets } & 5.0 \% \
\hline \text { Bowling balls } & 4.2 \% \
\hline \text { Camouflage neckties } & 3.1 \% \
\hline
\end{array}\
\text { Table } 8.1
\end{array}$$ Refer to Table 8.1,which gives hypothetical data on price changes for three goods.If the overall rate of inflation in the economy was 3.5%,what happened to the real price of camouflage neckties?
A) The real price of camouflage neckties fell by 0.4%.
B) The real price of camouflage neckties rose by 0.4%.
C) The real price of camouflage neckties rose by 6.6%.
D) The real price of camouflage neckties fell by 6.6%.

Question

$$\begin{array}{l}
\begin{array} { | c | c | } 
\hline \text { Good } & \begin{array} { c } 
\text { Price Increase since } \
\text { Last Year }
\end{array} \
\hline \text { Amusement park tickets } & 5.0 \% \
\hline \text { Bowling balls } & 4.2 \% \
\hline \text { Camouflage neckties } & 3.1 \% \
\hline
\end{array}\
\text { Table } 8.1
\end{array}$$ Refer to Table 8.1,which gives hypothetical data on price changes for three goods.If the overall rate of inflation in the economy was 3.5%,what happened to the real price of camouflage neckties?
A) The real price of camouflage neckties fell by 0.4%.
B) The real price of camouflage neckties rose by 0.4%.
C) The real price of camouflage neckties rose by 6.6%.
D) The real price of camouflage neckties fell by 6.6%.

Quizplus · Accepted Answer

The real price of an item adjusts for inflation, meaning it reflects the change in price relative to the overall change in price levels in the economy. Since the price of camouflage neckties increased by 3.1% and the overall inflation rate was 3.5%, the real price of camouflage neckties actually fell by 0.4% (3.1% - 3.5% = -0.4%).