If deflation is 0.5 percent per year and you receive a 1 percent decrease in your salary,then your
A)Real income falls,but your nominal income remains unchanged.
B)Real and nominal income both fall.
C)Real income remains unchanged,but your nominal income rises.
D)Real and nominal income both rise.

Question

Quizplus · Accepted Answer

Real and nominal income both fall because a decrease in salary directly reduces your nominal income, and with deflation (increase in the value of money), your real income (purchasing power) also decreases further than the nominal decrease.

If Deflation Is 0