Real income for a given year would be less than nominal income in that year if:
A) the consumer price index was less than 100 in that year.
B) nominal income in that year was greater than nominal income in the previous year.
C) nominal income in that year was less than nominal income in the previous year.
D) the consumer price index was greater than 100 in that year.

Question

Quizplus · Accepted Answer

Real income adjusts nominal income for changes in price level, so if the consumer price index (CPI) is greater than 100, it indicates inflation or an increase in the general price level compared to the base year. Therefore, real income would be less than nominal income because the purchasing power of the nominal income has decreased.

Real Income for a Given Year Would Be Less Than