Answer to Question #46643 in Macroeconomics for timson

Question

If nominal income rises by 4 percent while real income falls by 1 percent, then the price level must change by a?

Answer 1

We can write a following formula:
Change in real income = Change in nominal income -Changein prices level So
-1 percent = 4 percent - Change in prices level Change inprices level = 4 percent + 1 percent Change in prices level = 5 percent