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Distinguishing Individual Price Changes from Inflation
A news report states that the price of new cars has increased by 5% over the last year. A student concludes that this means the economy is experiencing a positive change in its general price level. Explain why this student's conclusion might be incorrect, even though the price of one type of good has risen.
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Economics
Economy
Introduction to Macroeconomics Course
Ch.4 Inflation and unemployment - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
Social Science
Empirical Science
Science
Analysis in Bloom's Taxonomy
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Consider an economy where a representative basket of goods contains 10 loaves of bread and 5 gallons of milk. In the first year, bread costs $2.00 per loaf and milk costs $4.00 per gallon. In the second year, the price of bread rises to $2.50 per loaf, while the price of milk falls to $3.80 per gallon. Based on this information, which statement accurately describes the change in the price level?
Evaluating Price Level Changes
Distinguishing Individual Price Changes from Inflation
An economy cannot be experiencing inflation if the prices of some goods and services are decreasing.