Question

For a person to keep his real income steady at a certain level from one year to the next, his nominal income must Multiple Choice
1. rise if the price index falls.
2. stay the same as the price index rises.
3. fall if the price index rises.
4. rise as fast as the price index.

Answer 1

Answer:

3. fall if the price index rises.

Explanation:

• According to the nominal income, the inflation is a one of the major factors that decrease the amount of the goods and the services that would be afforded with a given amount of the nominal incomes thus if the person wants to keep this real income steady for the next year's nominal income may fall as the increase of the inflation in the economy.  And can erode the nominal income gains.