If your gasoline purchases decrease from $150 per month to $80 over a period of one year due to lower prices and your income decreases from $1,600 per month to $1,500 per month,your nominal income has
A)Increased,but your real income has decreased.
B)Decreased,but your real income has increased.
C)Increased,and your real income has increased.
D)Increased, but your real income has remained the same.

Question

Quizplus · Accepted Answer

The decrease in gasoline purchases and income has resulted in a decrease in nominal income. However, since gasoline is a part of the basket of goods used to determine the consumer price index (CPI), the decrease in gasoline prices has resulted in a decrease in the cost of living, thus increasing the purchasing power of the individual. Therefore, the real income has increased.

If Your Gasoline Purchases Decrease from $150 Per Month to $80