If the cost of your gasoline purchases decrease from $150 per month to $80 over a period of one year due to lower prices and your income decreases from $1,600 per month to $1,500 per month,your nominal income has
A)Increased,but your real income has decreased.
B)Decreased,but your real income has increased.
C)Increased,and your real income has increased.
D)Increased,but your real income has remained the same.

Question

Quizplus · Accepted Answer

Nominal income has decreased from $1,600 to $1,500 per month, which means the purchasing power of your income has decreased. However, the decrease in gasoline cost from $150 to $80 per month means that your real income has increased as you have more disposable income after spending on gasoline purchases. Therefore, the decrease in nominal income has been offset by the decrease in the price of gasoline.

If the Cost of Your Gasoline Purchases Decrease from $150