Which of the following statements is true if your money income stays the same but the price of one good that you are buying goes up?

Question

Quizplus · Accepted Answer

If the price of one good that you are buying goes up while your money income stays the same, you will have less purchasing power, meaning that you can afford to buy fewer goods even though your nominal income has remained the same. This reduction in purchasing power is known as a decrease in effective purchasing power or real income. Therefore, option A is the correct answer. Option B is incorrect because nominal income is not affected in this scenario. Option C is also incorrect because you may continue to purchase the same quantity of other goods or reduce the quantity of the expensive good only. Option D is incorrect because your real income does not increase if the price of one good you are buying goes up.

Which of the Following Statements Is True If Your Money