When the inflation rate rises, the purchasing power of nominal income:
A) remains unchanged.
B) decreases.
C) increases.
D) changes by the inflation rate minus one.

Question

Quizplus · Accepted Answer

When the inflation rate rises, the prices of goods and services increase. This means that the same amount of nominal income can buy fewer goods and services, leading to a decrease in purchasing power.

When the Inflation Rate Rises, the Purchasing Power of Nominal