Real income
Real income is the income of
amount of goods and services that can be purchased
with the income.
According to the
long run, so they are not influenced by each other. In other words, if the nominal starting income was 100 and there was 10% inflation (general rise in prices, for example, what cost 10 now costs 11), then with nominal income of still 100, one can buy roughly 9% less; so if nominal income was not adjusted for inflation (did not rise by 10%), real income has dropped by approximately 9%.[1]
But if the classical dichotomy holds, nominal income will eventually go up by 10%, leaving real income unchanged from its original value.
References
- ^ Kagan, Julia. "Real Income". Investopedia. Retrieved 2019-03-12.
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