If salary of worker increases from 50,000 Naira to 80,000 Naira and average price of certain commodities consumed by the worker increase from 120 Naira to 160 Naira then ____________
A. The nominal income increases but leave the real income constant B. The real income increases, but nominal income has reduced C. The real income increases. but real income decreases D. Both the nominal and real income increase
Correct Answer: D
Explanation
The nominal income is the absolute value of salary i.e. N50.000 i.e. a nominal increase while the real income is measured by the value of the nominal income i.e. what nominal income can buy. Thus value \(=\mathrm{N} 50.0000 / 120=416.67\) With an increase to 80,000 and price \(160 \underline{80000 / 160=500}\) Thus. an increase in real income from \(416.67\) to \(500 .\)
