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

Your nominal income has increased from $1,500 to $1,525. However, your real income has decreased because the price increase of your cell phone service is proportionally larger than the increase in your income, reducing your purchasing power.

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