econ

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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%.

  • econ -

    I will be happy to critique your thinking.

  • econ -

    increases by 2%

  • econ -

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

  • econ -

    Didn't prices rise more than income?

  • econ -

    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

  • econ -

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

  • econ -

    so does that mean it decreases by 2%

  • econ -

    Right.

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