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.

Question

Quizplus · Accepted Answer

The real price of silver is the nominal price adjusted for inflation. Since the overall price level increased by 5 percent, the adjusted nominal price of silver would be $31/(1.05) = $29.52 per ounce. This shows that the real price of silver has decreased from $30 per ounce to $29.52 per ounce.

Suppose That in Some Country the Price of Silver Increased