Which of the following is correct?
A)Real and nominal incomes always move in the same direction.
B)Inflation increases the purchasing power of the dollar and necessarily reduces one's nominal income.
C)Inflation reduces the purchasing power of the dollar and necessarily reduces one's real income.
D)Inflation reduces the purchasing power of the dollar, but does not necessarily reduce one's real income.

Question

Quizplus · Accepted Answer

Inflation reduces the purchasing power of the dollar, but if nominal income increases at the same rate or more than inflation, real income may not decrease.

Which of the Following Is Correct