If your nominal income remains constant at $3,000 while the price of an important product in your budget,such as cell phone service,rises from $50 to $100,your real income has
A)Decreased by $50.
B)Decreased by $100.
C)Decreased by $150.
D)Remained constant.

Question

Quizplus · Accepted Answer

When the price of an important product in your budget increases, your nominal income buys less of that product, effectively decreasing your real income. In this case, the increase in the cost of cell phone service reduces the purchasing power of your nominal income by $50, the amount of the price increase.

If Your Nominal Income Remains Constant at $3,000 While the Price