In Which of the Following Cases Would Real Income Rise

question 137

Multiple Choice

In which of the following cases would real income rise?

• A) Nominal income rises by 8 percent, and the price level rises by 10 percent.
• B) Nominal income rises by 2 percent, and the price level remains unchanged.
• C) Nominal income falls by 4 percent, and the price level falls by 2 percent.
• D) Real income will rise in all of these cases.

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Definitions:

Precommitments

Binding agreements made in advance to restrict future actions or decisions, often used in behavioral economics to help individuals stick to long-term goals.

Time Inconsistency

The tendency of a person or entity to change their planned course of action over time due to a change in preferences.

Self-Control Problems

Self-control problems refer to the difficulty individuals face in resisting short-term temptations in order to achieve long-term goals.