The real purchasing power of an individual will NOT be affected if
A) money income doubles and the prices of all goods and services are cut in half.
B) money income is cut in half and prices of all goods and services remain constant.
C) money income is cut in half and the prices of all goods and services fall by fifty percent.
D) money income doubles and the prices of all goods and services remain constant.
E) money income falls and the price of one good falls.

Question

Quizplus · Accepted Answer

If money income is cut in half and the prices of all goods and services fall by fifty percent, the purchasing power remains unchanged because the relative change in income and prices is proportional.

The Real Purchasing Power of an Individual Will NOT Be