If your nominal income has increased by 2 per cent in one year, while the inflation rate for the same year is 3 per cent, you can conclude that your real income:
A) has increased by 1% approximately.
B) has decreased by 1% approximately.
C) has remained constant.
D) has either increased or decreased by 1%

Question

Quizplus · Accepted Answer

Your real income has decreased because the inflation rate (3%) is higher than the increase in your nominal income (2%). This means that the purchasing power of your income has decreased by approximately 1%.

If Your Nominal Income Has Increased by 2 Per Cent