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Let's suppose that in year 1 average incomes in the economy equal $30,000. The following year (year 2), average incomes rise to $33,000 (a ten
Let's suppose that in year 1 average incomes in the economy equal $30,000. The following year (year 2), average incomes rise to $33,000 (a ten percent increase). Let's suppose that prices (inflation) from year 1 to year 2 rise by twelve percent. From year 1 to year 2:
A) Nominal incomes and real incomes both increase.
B) Nominal incomes increase, but real incomes decrease.
C) Nominal incomes decrease, but real incomes increase.
D) Nominal and real incomes both decrease.
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