What does real income refer to?
Understand the Problem
The question is asking for the definition of 'real income' and presents multiple-choice options to identify the correct one. Real income typically refers to income adjusted for inflation, which means considering the purchasing power of the income.
Answer
Real income is the earnings after adjusting for inflation.
Real income refers to the earnings of individuals or the nation after adjusting for inflation. It is calculated by dividing nominal income by the price level.
Answer for screen readers
Real income refers to the earnings of individuals or the nation after adjusting for inflation. It is calculated by dividing nominal income by the price level.
More Information
Real income provides a more accurate measure of purchasing power, reflecting the true value of money after accounting for inflation impacts.
Tips
A common mistake is confusing nominal income, which does not account for inflation, with real income.
Sources
- Real Income, Inflation, and the Real Wages Formula - Investopedia - investopedia.com
- Real income - Wikipedia - en.wikipedia.org
