If Income Tax Rates Are Based on Nominal Income, as Inflation

Multiple Choice

If income tax rates are based on nominal income, as inflation increases, taxpayers will see:

A) an increase in their real incomes.
B) their taxes fall as their incomes fall.
C) their taxes rise even though their real incomes are falling.
D) an increase in the nominal income.
E) their taxes fall even though their real incomes are rising.