If This Year the CPI Is 125 and Last Year

question 166

Multiple Choice

If this year the CPI is 125 and last year it was 120, what do we know?

• A) Most goods have become more expensive.
• B) The price level has increased.
• C) The inflation rate has increased.
• D) Some goods have become cheaper.

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Definitions:

Sticky Wage Theory

The hypothesis that wages do not adjust quickly to changes in economic conditions, leading to unemployment and other inefficiencies.

Price Level

A measure of the average prices of goods and services in an economy at a given time, often monitored to understand inflation and the cost of living.

Natural Level

Refers to a state that an economic variable tends to trend towards in the long term, unaffected by short-term fluctuations.

Output

In economics, output refers to the total amount of goods and services produced by an economy or a firm in a given period.