When the price of a product rises faster than the inflation rate,
A)Nominal incomes of the users of that product fall.
B)Users of that product have higher real incomes than people who do not use the product.
C)Nominal incomes of the users of that product rise.
D)Real incomes of the users of that product fall.

Question

Quizplus · Accepted Answer

When the price of a product rises faster than the inflation rate, this means that the real price of the product is increasing, causing a decrease in the purchasing power of the consumers. This results in a decrease in the real incomes of the users of that product, as they have to spend a larger percentage of their income on that particular product. Therefore, option D is the correct answer.

When the Price of a Product Rises Faster Than the Inflation