Question

5 & 6

5. Use the following information to answer the next question. Joanna purchases only three products; orange juice, prepared meals, and on-demand episodes of her favorite shows. Each week she purchases 2 bottles of orange juice, 14 prepared meals, and 8 on-demand episodes. The prices of bottles of orange juice, prepared meals, and on-demand episodes for four different years are shown in the table below. Year Price of Orange Juice Price of Prepared Meals Price of On-Demand Episodes S2 S 6 S10 S6 S5 S12 $4 $7 $13 $4 $8 S11 Based on this information, which of the following statements is true? A. There was inflation from Year 3 to Year 4. B. Joanna spent $18 less in Year 1 than in Year 2. C. Joanna's purchases cost $30 more in Year 3 than in Year 2. D. Joanna's buying power increased between Year 1 and Year 4. 6. A person's real income will increase by 3% if her nominal income increases by A. 5% while the price index falls by 2%. B. 5% while the price index rises by 2%. C. 2% while the price index rises by 5%. D. 2% while the price index falls by 5%.

Answer 1

5. (D) Joanna buying power increased between year 1 and year 4

6.B. 5% , While the price Index rises by 2 percent as nominal income is combination of both real and inflation.