Question

Question 8 For a given amount of nominal income, the real income will: Fall if the price level falls Be unaffected if the price level falls O Fall if the price level rises O Rise as the price level rises

Answer 1

Answer 8). Fall if price level rises.

Nomianal income is the one which values the goods simply on the basis of money while the real income is based on inflation rate which calculates the amount of money you have along with purchasing power of that money.

Here in this for the give nominal income, as the price level rises the inflation will rise and due to rise in inflation level the pepole will be able to buy less amount of goods given the same amount of money. This implies that the purchasing power of the money decreases and thus with the less purchasing power as per the above definition the real income will decrease.