If the price of your cell phone service increases from $70 to $105 over a period of one year and your income rises from $1,500 to $1,525,your nominal income has
A)Increased,and your real income has increased.
B)Increased,but your real income has decreased.
C)Decreased,and your real income has decreased.
D)Increased,but your real income has remained the same.

Question

Quizplus · Accepted Answer

The increase in the price of cell phone service means that the individual's nominal income has increased from $1,500 to $1,525, but the increase in the cost of living means that their real income has actually decreased. This is because the increase in income is outweighed by the increase in expenses, as the cost of cell phone service has gone up.

If the Price of Your Cell Phone Service Increases from $70