Inflation:
A)always reduces real income.
B)never reduces real income.
C)reduces the real income of workers when wages increase more than prices do.
D)reduces the real income of workers when wages increase less than prices do.
E)increases the real income of workers only when wages increase less than prices do.

Question

Quizplus · Accepted Answer

Inflation reduces the real income of workers when wages increase less than prices do. This is because the cost of goods and services increases, but if wages do not increase at the same rate, purchasing power decreases, leading to a reduction in real income.