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If output rises but inflation prevents real income from increasing, what may happen to purchasing power?

Answer and explanation

Correct answer: Improvement in purchasing power may remain limited

Real income reflects income's purchasing power after accounting for price changes. If real income does not increase, households cannot necessarily afford more goods and services, even when output rises. Thus improvement in purchasing power may be limited, making option B correct.

Related tags

InflationReal IncomePurchasing PowerGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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