Asked by Chelsey Wheatley on Jul 25, 2024
Verified
Last year, Jane spent all of her income to purchase 200 units of corn at $5 per unit. This year, she spent all of her income to purchase 180 units of corn at $6 per unit.
A) Jane's nominal income and real income decreased this year.
B) Jane's nominal income decreased this year, but her real income increased.
C) Jane's nominal income and real income increased this year.
D) Jane's nominal income increased this year, but her real income decreased.
Nominal Income
The amount of money income received in a given time period, not adjusted for inflation.
Real Income
Income of individuals or nations after adjusting for inflation, reflecting the true purchasing power.
Corn
A cereal plant that yields large kernels on a cob, widely grown for food, fodder, and ethanol production.
- Distinguish between nominal and real variables, highlighting their importance in the study of economics.
Verified Answer
AS
Alexis StuartJul 27, 2024
Final Answer :
D
Explanation :
Last year, Jane spent $1000 (200 units * $5/unit) on corn. This year, she spent $1080 (180 units * $6/unit) on corn, indicating an increase in nominal income. However, she bought fewer units of corn this year, indicating a decrease in real income.
Learning Objectives
- Distinguish between nominal and real variables, highlighting their importance in the study of economics.
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