If nominal national income increased by 20% over a certain period of time while real national income increased by 10%,then
A)everybody in the economy became worse off.
B)inflation has decreased during this time period.
C)the labour force increased by 10%.
D)the price level has declined by about 10%.
E)the price level has increased by approximately 10%.

Question

Quizplus · Accepted Answer

Nominal national income measures the total income of a country using current market prices, while real national income measures the total income adjusted for inflation. If nominal national income increased by 20% and real national income increased by only 10%, it means that there was 10% inflation during the time period. This would lead to a rise in the price level by approximately 10%. Therefore, choice E is the correct answer.

If Nominal National Income Increased by 20% Over a Certain