Which of the following statements is true?
A) Inflation improves the standard of living of persons earning fixed incomes.
B) Prolonged and severe inflation has no effect on a country's social and political institutions.
C) The real rate of interest is the nominal, or stated, rate of interest divided by the inflation rate.
D) Real income is the amount of goods and services that can be purchased with a particular amount of money income.

Question

Quizplus · Accepted Answer

Real income refers to the purchasing power of an individual's or entity's income, considering the effects of inflation on buying capacity. It measures how many goods and services can be bought with a given amount of nominal (or money) income, thus providing a more accurate picture of an individual's economic status than nominal income alone.

Which of the Following Statements Is True