Question

Your spouse complains that her 6% raise this year will not keep up with the increase in prices. In other words, she is unable to buy the same basket of goods with her 6% raise. Therefore, she believes that her a. nominal income and real income increased. b. nominal income increased, but their real income decreased. c. nominal income and real income decreased. d. nominal income decreased, but their real income increased.

Answer 1

Answer:b. nominal income increased, but their real income decreased

Step-by-step explanation:

Nominal Income is income at the current market prices without adjustment for inflation.

Real income is income that has been adjusted for inflation.

The spouse 's inability to purchase the same basket of goods with the 6% increase shows the effect of inflation. It was the spouse nominal income that increased.

If it were the real income, she would be able to purchase the same basket of goods with the increase because her income would have been adjusted for the effect of inflation.