Practice Quiz

AP Economics Exam Prep

Category - Economics

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Jennifer receives a 2 percent increase in wages this year. The inflation rate is 4 percent. Which of the following is most likely to happen to Jennifer's financial situation?
  1. She will have more income to spend and greater purchasing power.
  2. She will have more income to spend and less purchasing power.
  3. Her cost of living and her purchasing power will decrease.
  4. Her cost of living and her purchasing power will increase.
Explanation
Answer: B - She will have more income to spend and less purchasing power.
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