If nominal income increases,then real income
A) increases.
B) increases if the price index falls.
C) increases if the percent increase in price index rises by more than the percent change in nominal income.
D) increases if you buy only the goods included in the consumer price index (CPI)and the majority of those goods get cheaper.
E) decreases.

Question

Quizplus · Accepted Answer

Real income increases if the price index falls because real income is nominal income adjusted for inflation. If nominal income rises and the price index falls, the purchasing power of income increases, leading to an increase in real income.

If Nominal Income Increases,then Real Income