If the price level is fixed, then changes in nominal income will be equivalent to changes in real income.

Question

Quizplus · Accepted Answer

If the price level is fixed (i.e. there's no inflation or deflation), then the nominal income (i.e. the dollar amount earned) will be directly proportional to the real income (i.e. the purchasing power of that dollar amount). In other words, if your nominal income increases by 10%, your real income (what you can buy with that money) will also increase by 10%. Conversely, if your nominal income decreases by 10%, your real income will also decrease by 10%. This assumes that the price level remains fixed and there are no changes in the availability of goods and services.

If the Price Level Is Fixed, Then Changes in Nominal