What is real income in economics?
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Real income refers to the income of an individual or group after taking into consideration the effects of inflation on purchasing power. For example, if you receive a 2% salary increase over the previous year and inflation for the year is 1%, then your real income only increases by 1%.
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Real income is the amount of money you have and the buying power of that money, based on the rate of inflation. Real incomecan go up or down based on whether the inflation rate is going up or down. When real income goes up, a person's purchasing power increases.
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