Real income will rise from one year to the next if nominal income
A) falls and the price level falls faster.
B) rises and the price level rises faster.
C) falls and the price level rises.
D) falls faster than the price level.

Question

Quizplus · Accepted Answer

Real income is calculated by adjusting nominal income for inflation. If nominal income falls but the price level falls faster, the purchasing power of the income increases, hence real income rises.

Real Income Will Rise from One Year to the Next