If the inflation rate in an economy is 5 percent and the income earned by workers...
If the inflation rate in an economy is 5 percent and the income earned by workers increases by 5 percent, then _____.
| nominal income increases by 5 percent and real income is unchanged |
| nominal income increases and real income declines |
| both nominal income and real income increase by 5 percent |
| both nominal income and real income decrease by 5 percent |
| nominal income declines and real income increases |
Homework Answers
Answer
Option 1
nominal income increases by 5 percent and real income are unchanged
Nominal income =real income + inflation
the inflation and increase in income is the same as the real income does not change
Nominal income increase =0+5=5%
the nominal income increases by 5%.
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