When a person's nominal income falls in a period of inflation then the person's real income:
A) Definitely falls.
B) Definitely rises.
C) Depends upon relative price changes.
D) Can rise or fall.

Question

Quizplus · Accepted Answer

When a person's nominal income falls during a period of inflation, their real income definitely falls because real income is adjusted for inflation, meaning their purchasing power decreases.

When a Person's Nominal Income Falls in a Period of Inflation