Question

Jennifer receives an increase in her nominal income. She complains that the current inflation rate of five percent erodes the real purchasing power of her additional nominal income. This is false:__________.a. if her wealth decreasesb. since inflation always reduces purchasing powerc. if the increase in her nominal income is more than five percentd. if the increase in her nominal income is less than five percent

Answer 1

Answer:

Option C: if the increase in her nominal income is more than five percent.

It is true only if only if the increase in her nominal income is less than five percent.

Explanation:

An inflation is simply an increase (slight or Sharp) in the average price level of prices of goods and services of which the opposite is deflation.

INFLATION RATE is simply an annual percentage rate of increase in the average price level of commodities/services.

NOMINAL INCOME

Is defined simply as the amount of money received in a given period of time. It is usually measured in current dollars and does not change or simply as the numbers of dollars received as wages, rents, interests, or profits.

nominal incomes tend to rise with inflation

If inflation is higher than what was expected, creditors receive a lower real interest rate than they had anticipated and vice versa.

As the price level rises, the value of money decreases, so people must hold more money to purchase goods and services.