If the CPI increases and the nominal income remains the same:
A) the nominal income increases.
B) the real income increases.
C) the real income falls.
D) the real income remains the same.
E) we cannot say whether any of these apply.

Question

Quizplus · Accepted Answer

If the CPI increases, it means the overall level of prices has gone up. Therefore, the purchasing power of the nominal income has declined. This results in a fall in the real income.

If the CPI Increases and the Nominal Income Remains the Same