A Decline in Real Income

question 144

Multiple Choice

A decline in real income

• A) can occur only if there is a decline in nominal income
• B) can occur only if there is an increase in the price level
• C) can occur only if there is either a decline in nominal income or an increase in the price level
• D) cannot occur if there is either an increase in nominal wages or a decline in the price level
• E) can occur only if there is a decline in the price level

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Definitions:

Discounted

Reduced in price or reflecting the present value of future cash flows when taking into account the time value of money.

Present Value

The value today of a future amount of money or series of payments, adjusted for a specific return rate.

Discounted

The process of determining the present value of a payment or stream of payments that will be received in the future.

Present Value

The current value of a future amount of money or stream of cash flows, given a specified rate of return.