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.

To find out the change in the person's real income, we need to understand what real income is. Real income is a measure of purchasing power and is calculated by adjusting a person's nominal income for changes in the price level.

To find the change in the person's real income, we need to start by calculating the change in the price level. The price level increased by 10%. This means that goods and services on average became 10% more expensive.

Next, we calculate the change in the person's real income by adjusting their nominal income for the change in the price level. The person's nominal income increased by 8%. Since the price level increased by 10%, their real income will decrease. The change in real income is calculated by subtracting the change in the price level from the change in nominal income.

In this case, the person's real income will decrease by:
Change in nominal income - Change in price level = 8% - 10% = -2%

Therefore, the correct answer is d) decreases by 2%.