Suppose that pizza prices increase by 5% while the general price level has increased by 2%. In real terms pizza prices have increased by:
A) 1%.
B) 3%.
C) 5%.
D) 8%.
E) 10%.

Question

Quizplus · Accepted Answer

The real increase in pizza prices is calculated by subtracting the general inflation rate (2%) from the nominal increase in pizza prices (5%), which results in a 3% real increase.

Suppose That Pizza Prices Increase by 5% While the General