Question

Differentiate between money income and real income. Give

one example of each.

OR

a. Write down four points to explain the importance of keeping

household records.

b. Suggest six ways a family can reduce the expenditure.​

Answer 1

Answer:

Differentiate between money income and real income

Real income is nominal income adjusted for inflation. Real income is the buying power of your nominal income. If prices go up, nominal income (dollar income) being the same, real income goes down. If prices go down, nominal income (dollar income) being the same, real income goes up. Due to the presence of non-monetary production, real national income on its own cannot he treated as a true index of welfare because it does not add to the flow of goods and services in the economy.

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