An associate professor of physics gets a $200 a month raise.She figures that with her new monthly salary she can buy more goods and services than she could buy last year.
A)Her real and nominal salary have risen.
B)Her real and nominal salary have fallen.
C)Her real salary has risen and her nominal salary has fallen.
D)Her real salary has fallen and her nominal salary has risen.

Question

Quizplus · Accepted Answer

With a $200 a month raise, her nominal salary has risen. If the increase in her nominal salary is greater than the increase in the cost of living index (inflation), then her real salary has also risen. Since the question does not provide information about inflation, we can assume her real and nominal salary have both risen. Therefore, the correct answer is A.

An Associate Professor of Physics Gets a $200 a Month