If Everyone Buys the Same Goods Every Year and the Price

question 90

Multiple Choice

If everyone buys the same goods every year and the price of housing rises by 38%,it is:

• A) certain the consumer price index (CPI) has increased; if your nominal wage has risen by less than 38%, your real wage has fallen.
• B) certain the CPI has increased; if your nominal wage has risen by more than 38%, your real wage has risen.
• C) possible that the CPI has increased, but it is certain your real wage has fallen.
• D) possible that the CPI has increased; however, it is certain your real wage has risen if, and only if, your nominal wage increased by more than 19% because housing accounts for exactly 50% of the CPI.
• E) not possible to tell what happened to the CPI because other than for housing, we do not know what happened to the prices of any of the other goods.

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