Which of the following statements is TRUE if your money income stays the same but the price of one good that you are buying goes up?
A) Your effective purchasing power falls.
B) Your nominal income has been decreased.
C) You will have to reduce the quantities you purchase of all goods.
D) Your real income has increased.

Question

Quizplus · Accepted Answer

If the price of one good that you are buying goes up, you can buy less of that good without changing your income level. This means that your effective purchasing power for that particular good has fallen. Your nominal income remains the same but the price increase has reduced your ability to purchase the same quantity of the good.

Which of the Following Statements Is TRUE If Your Money