If the Inflation Rate in an Economy Is 5 Percent

Multiple Choice

If the inflation rate in an economy is 5 percent and the income earned by workers increases by 5 percent,then _____.

A) nominal income declines and real income increases
B) both nominal income and real income increase by 5 percent
C) nominal income increases and real income declines
D) both nominal income and real income decrease by 5 percent
E) nominal income increases by 5 percent and real income is unchanged