Suppose That the Price of Cornflakes Is $3 Per Box

question 277

Multiple Choice

Suppose that the price of cornflakes is $3 per box and the price of oatmeal is $4.50 per box. Both boxes contain the same number of ounces of cereal. The relative price of cornflakes in terms of oatmeal is

• A)0.67.
• B)1.0.
• C)0.75.
• D)1.50.

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Definitions:

Chain-Weighted System

An inflation measure that adjusts the weights from year to year in calculating a price index, thereby reducing the bias caused by a fixed-price weighting system.

Nominal Gross Domestic Product (GDP)

The market value of all goods and services produced within a country in a given period, measured without adjusting for inflation.

Real GDP

The total value of all goods and services produced by a country in a year, adjusted for inflation, making it a measure of economic output that accounts for changes in the price level.

GDP Price Index

An indicator reflecting the variation in costs for all newly produced domestic final goods and services within an economy.