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A worker earned ₹8,000 per month in an earlier year and ₹12,000 in a later year. Why is this information alone insufficient to establish an improvement in purchasing power?

Answer and explanation

Correct answer: Changes in the prices of goods and services must also be considered

Nominal income rises by 50%, but the purchasing power of that income depends on how prices changed. Without suitable price information, the change in real income cannot be determined.

Related tags

InflationNominal IncomeReal IncomeHistorical Comparison

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