Assume that you live in a simple economy in which only three goods are produced and traded: cashews, pecans, and almonds. suppose that on january 1, 2015, cashews sold for $12.50 per pound, pecans were $5.00 per pound, and almonds were $5.00 per pound. at the end of the year, you discover that the cashew crop was lower than expected and that cashew prices had increased to $13.00 per pound, but pecan prices stayed at $5.00 and almond prices had actually fallen to $4.75.

Question

Casey Phillips

Business

19 August, 16:35

Assume that you live in a simple economy in which only three goods are produced and traded: cashews, pecans, and almonds. suppose that on january 1, 2015, cashews sold for $12.50 per pound, pecans were $5.00 per pound, and almonds were $5.00 per pound. at the end of the year, you discover that the cashew crop was lower than expected and that cashew prices had increased to $13.00 per pound, but pecan prices stayed at $5.00 and almond prices had actually fallen to $4.75.

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Dakota Miles · Answer 1

Answer: The overall price level increased.

Explanation: The rise in the overall price level is termed as inflation. From the information we can see that the average price of the three goods in 2015 was $7.50. A year later, the average price changed to $7.58.

Therefore, the overall price level rose as the average price level increased from $7.50 to $7.58.