Question

we distinguish betweenincome andincome because receiving a salary increase is better than not getting one, but the additional dollars may not allow you to buy as many goods and services as last year due to inflation.

Answer 1

We distinguish between nominal income and real income because receiving a salary increase is better than not getting one, but the additional dollars may not allow you to buy as many goods and services as last year due to inflation.

If your income was $50,000 last year and your income is $50,000 this year, your income will be the same. However, when inflation changes, the previous purchasing power is affected. Basically, when inflation rises by 2% for him, the cost of goods also rises by 2% for him.

The Consumer Price Index measures changes in retail prices. The Consumer Price Index (CPI) is used to measure changes in the cost of living at which retail prices of consumer goods and services are achieved.

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