If real income increases while nominal income remains the same; it can be inferred that?

A. Unemployment rate has decreased
B. General prices have fallen
C. Employment rate has risen
D. General prices have risen

Correct Answer:

Option B – General prices have fallen

Explanation

To better understand this, we need to know what real and nominal income is all about. Nominal value is measured in terms of money, where as real value is measured against the purchasing power of money for goods or services. If real income increases while nominal income remains the same, it means that the price for goods and services has fallen. This invariably means the purchasing power of money has increased.