One family earned an income of $28,000 in 1995. Over the next five years, their income increased by 15 percent, while the CPI increased by 15 percent. After five years, this family's nominal income ________, and their real income ________.

Question

Quizplus · Accepted Answer

The family's nominal income increased, as it was 15 percent higher in 200. However, the family's real income did not change because their nominal income increased by the same percent as the price level. In other words, the purchasing power or real income of the family did not change.

One Family Earned an Income of $28,000 in 1995