econ
posted by Anonymous on .
If a person's nominal income increases by 8% while the price level increases by 10%, the person's real income:
a) increases by 2%, b) increases by 18%, c) decreases by 18%, d) decreases by 2%.

I will be happy to critique your thinking.

increases by 2%

Think about it again. If the person's income increases less than the price level, how can the person's real income INCREASE??

Didn't prices rise more than income?

i'm not understanding this one, so for the real income am I suppose to add the nominal and price level so that it increases to 18 or what? please help I am not understanding

When prices rise more than income, then your real income decreases.

so does that mean it decreases by 2%

Right.