Question

When prices rise a. the effect in the rich and poor is uncertain. b. both the rich and poor lose real income. c. the poor benefit at the expense of the rich. d. the rich benefit at the expense of the poor.

Answer 1

Answer:

The correct answer is letter "B": both the rich and poor lose real income.

Explanation:

Real income refers to the amount of money left to individuals after adjustments for inflation. In front of an increase in prices or, inflation, the purchasing power of individuals decreases since wages tend to remain at the same level. The same situation is faced by poor and wealthy individuals, thus, both of them see their real income decreased when inflation hits the markets.