If money income remains the same while the average price level doubles:
A) nominal income will fall.
B) real income will fall.
C) interest rates will fall.
D) purchasing power will increase.

Question

Quizplus · Accepted Answer

If the average price level doubles, it means that prices have increased, but your money income has remained the same. This means that the value of your money has decreased. Real income takes into account the purchasing power of your money, so if the purchasing power decreases, real income decreases.

If Money Income Remains the Same While the Average Price