contestada

Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. The person's real income will
a) rise by about 4 percent.
b) rise by about 1 percent.
c) remain constant.
d) fall by about 1 percent.

Respuesta :

Answer:

b) rise by about 1 percent

Explanation:

Given that a person's nominal income rises by 5 percent and the price level rises from 125 to 130.

Percentage increase in price level = (130 - 125)/125

                                                         = 5/125

                                                          = 1/25 = 4%

Difference between rise in the person's nominal income and rise in price level

= 5% - 4%

= 1%

Hence the right option is b) rise by about 1 percent.

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